Elsevier

Finance Research Letters

Volume 49, October 2022, 103125
Finance Research Letters

Is ESG the key to unlock debt financing during the COVID-19 pandemic? International evidence

https://doi.org/10.1016/j.frl.2022.103125Get rights and content

Highlights

  • We examine whether stakeholder engagement impacts firms’ ability to raise debt.

  • We find that firms with greater stakeholder engagement obtain higher debt financing.

  • The effect is pronounced for riskier firms, reinforcing the role of relationships.

  • Stakeholder engagement enables resiliency to firms during the COVID-19 pandemic.

Abstract

In this article, we examine whether stakeholder engagement impacts firms’ ability to raise debt during the COVID-19 pandemic. Using firm-level data from 51 countries, we find that firms with greater stakeholder engagement obtain higher debt financing during the COVID-19 pandemic. This effect is more pronounced for riskier firms, highlighting the importance of maintaining relationships with stakeholders. Moreover, we find that stakeholder engagement facilitates higher debt financing for less asset-intensive firms and firms in emerging economies. Our empirical analysis reinforces the role of firms’ stakeholder engagement in mitigating the adverse impact of economic shocks.

JEL classification

G01
G21
G32
H12
M14

Keywords

CSR
ESG
Stakeholder
COVID-19
Debt financing

Data availability

Data will be made available on request.

Cited by (0)

We thank the Editor Laura Ballester and the two anonymous reviewers for the useful comments and suggestions that helped in improving the manuscript. The authors thank Venkataraman S, seminar participants at the 2021 Rajagiri Conference on Economics and Finance (RCEF) and IIM Kozhikode for their comments. Usual disclaimers apply. The author names appear in the reverse alphabetical order.

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