Abstract
We examine whether firms' ESG performance is influenced by bondholder preferences. We argue that insurance companies have unique incentives to monitor bond issuers' ESG performance because insurers face enhanced exposures to ESG shocks in their balance sheets and trading operations. Consistent with this argument, we find that firms with higher bond ownership by insurance companies are associated with higher future ESG ratings. To address potential identification concerns, we test changes in bond issuers' ESG ratings following the initial bond investment by insurance companies. We find that firms' ESG performance improves after insurance companies' initial bond investment. We also find that this improvement in ESG performance is concentrated in firms with greater reliance on bond financing and investment capital from insurance companies. Our study underscores the importance of bond ownership structure in influencing corporate ESG performance.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
