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on Corporate Finance |
| By: | Petreski, Aleksandar (Jönköping International Business School); Schäfer, Dorothea (DIW Berlin &, Jönköping International Business School); Stephan, Andreas (Linnaeus University) |
| Abstract: | This study explores the effect of frequent green bond issuance on a firm’s financing costs. Using a sample of listed Swedish real estate companies issuing in total 1, 074 bonds over the period from 2011 to 2021, difference-in-difference analyses and instrumental variable estimations are applied to identify the causal impact of frequent green vis-à-vis frequent non-green bond issuing on a firm’s cost of capital and credit rating. The paper argues that repetitive issuance lowers a firm’s cost of capital, while the effects of first or one-time green bond issuance are the opposite. In line with the reputation capital hypothesis, issuing green bonds even lowers the firm’s cost of equity capital, while issuing non-green bonds does not affect the cost of equity. |
| Keywords: | bond issuance; green debt; reputation capital; sustainability; ESG |
| JEL: | G32 R30 R32 |
| Date: | 2023–11–21 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:cesisp:0493&r=cfn |
| By: | Francis OSEI-TUTU (Paris School of Business (PSB)); Laurent WEILL (LaRGE Research Center, Université de Strasbourg) |
| Abstract: | We examine the effect of regional favoritism on the access of firms to credit. Using firm-level data on a large sample of 29, 000 firms covering 47 countries, we investigate the hypothesis that firms in the birth regions of national political leaders have better access to credit. Our evidence suggests that firms located in birth regions of political leaders are less likely to be credit constrained. The effect takes place through the demand channel: firms in leader regions feel less discouraged in applying for loans. We find no evidence, however, of preferential lending from banks to firms in leader regions. Thus, regional favoritism affects access to credit through differences in perceptions of firm managers, not deliberate changes in the allocation of resources by political leaders. |
| Keywords: | regional favoritism, access to credit, borrower discouragement. |
| JEL: | D72 G21 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:lar:wpaper:2023-04&r=cfn |
| By: | Andrea Nocera; M. Hashem Pesaran |
| Abstract: | We investigate the short- and long-term impacts of the Federal Reserve's large-scale asset purchases (LSAPs) on non-financial firms' capital structure using a threshold panel ARDL model. To isolate the effects of LSAPs from other macroeconomic conditions, we interact firm- and industry-specific indicators of debt capacity with measures of LSAPs. We find that LSAPs facilitated firms' access to external financing, with both Treasury and MBS purchases having positive effects. Our model also allows us to estimate the time profile of the effects of LSAPs on firm leverage providing robust evidence that they are long-lasting. These effects have a half-life of 4-5 quarters and a mean lag length of about six quarters. Nevertheless, the magnitudes are small, suggesting that LSAPs have contributed only marginally to the rise in U.S. corporate debt ratios of the past decade. |
| Date: | 2023–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2310.18638&r=cfn |
| By: | Fabisik, Kornelia; Ryf, Michael; Schäfer, Larissa; Steffen, Sascha |
| Abstract: | We study the effect of changes in firms’ ESG ratings on the cost of debt of U.S. firms using a methodology change of an ESG rating provider. We find that loan spreads of downgraded ESG-rated firms in the secondary corporate loan market increase by about 10% compared to non-downgraded ESG-rated firms after the methodology change. The effect of ESG rating downgrades is not driven by the increase in the fundamental default risk of firms but rather by the premium charged by investors above the spread for default risk. The effect is stronger for firms that are more financially constrained, firms that are more exposed to ESG and, particularly, climate risk concerns as well as firms that are more held by climate-concerned lenders. We show that also loan spreads of private (unrated) firms in industries affected by ESG rating downgrades increase after the methodology change. JEL Classification: E44, G20, G24 |
| Keywords: | climate finance, ESG ratings, loan spreads, private firms |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20232878&r=cfn |