The Effects of ESG Performance and Preferences on U.S. Corporate Bond Prices

41 Pages Posted: 6 May 2022

See all articles by Lukas Handler

Lukas Handler

Vienna University of Economics and Business

Rainer Jankowitsch

WU (Vienna University of Economics and Business); Vienna Graduate School of Finance (VGSF)

Alex Pasler

WU Vienna University of Economics and Business

Date Written: May 3, 2022

Abstract

We study the effects of ESG performance and preferences on the U.S. corporate bond market. Consistent with the theory, we show that firms with superior ESG scores benefit from lower yields and improved liquidity. In addition, we reveal a time-varying effect of ESG performance induced by a changing demand of investors for ESG securities. The effect on yields for firms with higher ESG performance in times of higher ESG preferences is up to 25 bp. Furthermore, we divide a firm's ESG performance into its underlying pillars E, S, and G, finding that the results are mainly driven by environmental concerns. Overall, our results provide evidence for theoretical models based on non-pecuniary utility benefits for ESG investors.

Keywords: ESG, corporate bonds, bond pricing, liquidity

JEL Classification: G11, G12

Suggested Citation

Handler, Lukas and Jankowitsch, Rainer and Pasler, Alexander, The Effects of ESG Performance and Preferences on U.S. Corporate Bond Prices (May 3, 2022). Available at SSRN: https://ssrn.com/abstract=4099566 or http://dx.doi.org/10.2139/ssrn.4099566

Lukas Handler (Contact Author)

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

Rainer Jankowitsch

WU (Vienna University of Economics and Business) ( email )

Welthandelsplatz 1
Vienna, Vienna AT1020
Austria
+43 1 31 336 4340 (Phone)
+43 1 310 0580 (Fax)

Vienna Graduate School of Finance (VGSF) ( email )

Welthandelsplatz 1
Vienna, 1020
Austria

Alexander Pasler

WU Vienna University of Economics and Business ( email )

Welthandelsplatz 1, Building D1, 3rd Floor
Vienna, 1020
Austria

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