The impact of corporate sustainability performance on information asymmetry: the role of institutional differences

Diebecker, Jan; Sommer, Friedrich

doi:10.1007/s11846-016-0195-y

Cited by 30 publications

(18 citation statements)

References 99 publications

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“…In other words, investors may reward CS investments as long as they fulfil a function of signalling reputation that can be used to overcome the negative effects of digitalization on information asymmetries. This confirms Diebecker and Sommer (), who report a null or even positive effect of some CS dimensions on information asymmetries. Therefore, efforts in digitalization and CS are only yielding positive results for those banks making progress in both areas.…”

Section: Discussionsupporting

confidence: 88%

“…CS relates to the management of non-financial aspects such as economic, environmental and social concerns. CS performance reduces information asymmetries (Cho et al, 2013;Diebecker and Sommer, 2017) due to the appetite for non-financial company information. In particular, CS generates reputation for banks (Forcadell and Aracil, 2017a;Herzig and Moon, 2013).…”

Section: Corporate Sustainability In the Financial Industry: Reducingmentioning

confidence: 99%

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The Impact of Corporate Sustainability and Digitalization on International Banks’ Performance

2020

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We analyse the implications for international banks of two contemporary megatrends: corporate sustainability (CS) and digitalization. The digital environment and the availability of massive data from customers generate asymmetric information for banks to the detriment of customers, who experience individual vulnerabilities such as privacy rights. This can hinder the positive influence of digitalization in banks' performance, with relevant managerial and political implications. In this context, the reputation generated by CS strategies can constitute a credence factor that reduces customers' fears of opportunistic behavior and information asymmetries. We test and find support for our hypothesis over a panel data of large international banks from developed countries. Our findings shed light on the mutual reinforcement of CS and digitalization strategies in enhancing banks' market performance and efficiency. Policy Implications• Our study shows that digitalization requires the complementary action of CS-based reputation to enhance banks' performance. This suggests the need for reputation building in those sectors (public and private) immersed in the digital transformation. By doing so, organizations can reduce information asymmetries for their main stakeholders. Since CS efforts exhibit an important potential for building organizational reputation, governments should stimulate the firms' CS investments.• Banks' survival against disruptive forces urges to reconsider the basis of its business model. It is not sufficient to react against digital-born companies' menace with M&A-driven strategies. For that reason, we suggest that including CS in the basis of the banking business model can contribute to achieving better market performance and efficiency and to overcoming fierce competition by new entrants.

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Section: Discussionsupporting

confidence: 88%

Section: Corporate Sustainability In the Financial Industry: Reducingmentioning

confidence: 99%

The Impact of Corporate Sustainability and Digitalization on International Banks’ Performance

2020

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“…Tascón, Castro, Fernández-Cuesta, and Castaño (2020) show that European listed carbon emitters more slowly adjust their debt to target levels, suggesting high transaction costs associated with carbon emissions. Furthermore, building on the contribution by Diebecker and Sommer (2017), who evidence a negative effect of corporate sustainability performance (CSP) on information asymmetry for a sample of European firms, we expect information on carbon performance (as part of CSP) to reduce information asymmetry and be positively valued by investors accordingly. In line with the POT, this reduction in information asymmetry would help a firm obtain debt.…”

Section: Carbon Performance and Debt Along The Life Cyclementioning

confidence: 99%

How does a firm's life cycle influence the relationship between carbon performance and financial debt?

2021

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In a progressively more stringent regulatory context concerning greenhouse gas emissions derived from a growing awareness of how economic activity affects our environment, this study analyzes how the firm's life cycle affects the relationship between carbon performance and financial debt. Using panel data on a sample of European listed firms during the 2005-2018 period, we find evidence suggesting that firms with better carbon performance have greater access to external financing during their growth stages and lesser access during maturity, although it has no effect during the shake-out stage. Furthermore, carbon performance has a strong positive effect during growth, maturity, and shake-out when firms need to finance additional tangible investments. We also find that the negative relationship between liquidity and debt is reversed during innovative stages for firms with better carbon performance. Our results are robust to the use of alternative measures of life cycle stages and to the consideration of industrial, legal, and cultural contexts.

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“…Therefore, there is information asymmetry within the principal-agent framework of decentralized environmental govern-a Figure 1. Institutional relationship between central and local governments in air pollution control ance (Diebecker and Sommer, 2017). The fundamental issue is thus how the central government can design effective institutions with available policy instruments so that local governments are willing to cooperate with it by adopting strict environmental governance.…”

Section: Institutional Contextmentioning

confidence: 99%

Air Pollution Regulations in China: A Policy Simulation Approach with Evolutionary Game

Chu¹,

Bian²,

Yang³

2022

PROBL EKOROZW

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In the institutional context of China’s political centralization and fiscal decentralization, this study explores the environmental regulations that make the central and local governments join efforts in air pollution control. Policy simulations in an evolutionary game show that the best approach is to internalize environmental costs and benefits in local governments’ objective function. The effectiveness of several policy instruments is examined individually and jointly, including administrative inspection, transfer payment, and environmental taxes. It is shown that in case environmental consequences are not internalized, appropriate application of policy instruments can incentivize goal-oriented local governments to choose the socially optimal strategy.

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The impact of corporate sustainability performance on information asymmetry: the role of institutional differences

Cited by 30 publications

References 99 publications

The Impact of Corporate Sustainability and Digitalization on International Banks’ Performance

The Impact of Corporate Sustainability and Digitalization on International Banks’ Performance

How does a firm's life cycle influence the relationship between carbon performance and financial debt?

Air Pollution Regulations in China: A Policy Simulation Approach with Evolutionary Game

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