Corporate ESG Profiles and Banking Relationships

Houston, Joel F.; Shan, Hongyu

doi:10.1093/rfs/hhab125

Cited by 250 publications

(66 citation statements)

References 40 publications

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“…Further, the plot also shows that the lowest average ESG score is about 7.0 which is distinctly above average, indicating that SLLs are in general issued by companies which already have a stronger sustainability performance. This finding is aligned with prior literature on bank lending and ESG performance (e.g., Houston & Shan (2021)).…”

Section: Kpi Score and Esg Performancesupporting

confidence: 91%

“…Özlem Dursun-de Neef et al (2022) find that SLLs incentivize firms to improve their sustainability performance by increasing their environmental and governance scores. Houston & Shan (2021) show that banks are more likely to grant loans to borrowers with ESG profiles similar to their own and positively influence the borrower's subsequent ESG performance. However, Kim et al (2021) find that the ESG scores of borrowers deteriorate after the issuance of low disclosure quality SLLs.…”

Section: Kpi Score and Esg Performancementioning

confidence: 96%

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Are Sustainability-Linked Loans Designed to Effectively Incentivize Corporate Sustainability? A Framework for Review

Auzepy¹,

Bannier²,

Martin³

2023

SSRN Journal

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Section: Kpi Score and Esg Performancesupporting

confidence: 91%

Section: Kpi Score and Esg Performancementioning

confidence: 96%

Are Sustainability-Linked Loans Designed to Effectively Incentivize Corporate Sustainability? A Framework for Review

Auzepy¹,

Bannier²,

Martin³

2023

SSRN Journal

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“…In addition, banks' lending decisions are often affected by the matching of ESG profiles between the borrower and the lender. Houston and Shan (2021) document that banks are more likely to lend to borrowers with similar ESG profiles. This effect is not driven by different lenders assessing firms' ESG risks differently, but largely driven by a two-sided matching between lenders and borrowers on non-price factors, such as perceived ESG reputation.…”

Section: Capital Structurementioning

confidence: 99%

Sustainable Finance: ESG/CSR, Firm Value, and Investment Returns*

Chang

Jin

et al. 2022

Asia-Pac J of Fin Stud

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We review the burgeoning sustainable finance literature, emphasizing the value implications of ESG (environmental, social, and governance) and CSR (corporate social responsibility) practices. We use a discounted cash flow valuation framework to identify value drivers through which such practices can enhance firm value. Collectively, empirical evidence supports that they increase firm value by motivating employees, strengthening customer-supplier relationships, boosting long-term growth, increasing dividends, and reducing financing costs. Furthermore, more socially responsible firms deliver no higher excess stock returns in the long run. Green bonds neither provide issuers with a price premium nor make investors sacrifice on lower returns. Socially responsible investing (SRI) funds generate no higher riskadjusted long-term returns than non-SRI funds. Finally, we briefly suggest several topics for future research on sustainable finance.

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“…The second refers to the firm level, including institutional Investors (Dyck et al, 2019), family businesses (Abeysekera and Fernando, 2020), and state-owned enterprises (Hsu, Liang, and Matos, 2021). The third refers to the market level, including import competition (Xu and Wu, 2021), cross-listing (Boubakri et al, 2016), and banks (Houston and Shan, 2022). The fourth refers to the country level, including economic development (Cai, Pan, and Statman, 2016) and the legal system (Liang and Renneboog, 2017).…”

Section: Introductionmentioning

confidence: 99%

Can performance-based budgeting reform improve corporate environment in ESG? Evidence from Chinese-listed firms

Wang

2022

Front. Environ. Sci.

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Finance is a pillar industry of national governance. It also provides a solid guarantee for achieving the official Double Carbon target. The question of how to forefront the role of environmental governance in the reform of fiscal and taxation systems, whilst also motivating enterprises to enhance Environment in Environmental, Social, and Governance (EESG) considerations is worth investigating in depth. This study takes A-share listed companies in China from 2001 to 2020 as examples. The effect of Performance-Based Budgeting (PBB) reform on the EESG of these enterprises is empirically examined through quasi-natural experiments using a multi-time difference-in-difference model. We find that PBB significantly optimizes the EESG of the enterprises. The placebo test, the difference-in-difference method, and a series of other robustness tests all support this conclusion. Furthermore, it is suggested that the environmental governance effect of PBB is more significant in areas with heavy financial pressure and stronger government audit. The environmental governance effect of the PBB reform is significant for enterprises with government contracts, strong green innovation capabilities, or high financing constraints. The mechanism test is performed, and the results suggest that the influence mechanism of this environmental governance role lies in the fact that PBB has improved environmental protection subsidies and enhanced fiscal transparency. Through the economic consequences test, we find that enterprise EESG can bring economic benefits to enterprises, which is reflected in the improvement of enterprise return on total assets, price-to-book ratio, and total patent authorization. This study enriches literature on the economic consequences of PBB, and has significance in deepening current fiscal and tax system reform, vigorously optimizing the major strategy of carbon peak and carbon neutrality.

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Corporate ESG Profiles and Banking Relationships

Cited by 250 publications

References 40 publications

Are Sustainability-Linked Loans Designed to Effectively Incentivize Corporate Sustainability? A Framework for Review

Are Sustainability-Linked Loans Designed to Effectively Incentivize Corporate Sustainability? A Framework for Review

Sustainable Finance: ESG/CSR, Firm Value, and Investment Returns*

Can performance-based budgeting reform improve corporate environment in ESG? Evidence from Chinese-listed firms

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