How do ESG controversies moderate the nexus between ESG
performance and cost of capital? Evidence from European listed
companies

J 2024

How do ESG controversies moderate the nexus between ESG performance and cost of capital? Evidence from European listed companies

HAMPL, Filip and Dagmar VÁGNEROVÁ LINNERTOVÁ

Basic information

Original name

How do ESG controversies moderate the nexus between ESG performance and cost of capital? Evidence from European listed companies

Authors

HAMPL, Filip (203 Czech Republic, guarantor, belonging to the institution) and Dagmar VÁGNEROVÁ LINNERTOVÁ (203 Czech Republic)

Edition

MANAGERIAL FINANCE, ENGLAND, EMERALD GROUP PUBLISHING LTD, 2024, 0307-4358

Other information

Language

English

Type of outcome

Článek v odborném periodiku

Field of Study

50206 Finance

Country of publisher

United Kingdom of Great Britain and Northern Ireland

Confidentiality degree

není předmětem státního či obchodního tajemství

References:

URL

Impact factor

Impact factor: 1.600 in 2022

Organization unit

Faculty of Economics and Administration

DOI

http://dx.doi.org/10.1108/MF-12-2023-0762

UT WoS

001280862100001

Keywords in English

ESG performance; controversies; responsibility; cost of equity; cost of debt; financing cost

Abstract

V originále

This study aims to investigate the effect of ESG controversies and their moderating role in ESG performance and the cost of equity and overall, short-term and long-term debt capital relationship in European listed companies. The study employs two-way fixed effects panel linear regression models on the balanced longitudinal dataset of 231 European non-financial companies listed in the MSCI Europe Index in 2017–2022. To check the robustness, the study utilises the fixed effects logistic regression models with heteroskedasticity-consistent standard errors. The study reveals the significant effect of ESG performance (negative) and ESG controversies (negative) on the cost of debt capital and the substantial moderating effect of ESG controversies (positive). Additionally, it provides empirical evidence of the crossover moderating effect of ESG controversies in ESG performance and cost of equity relationship. To the best of the authors' knowledge, this is the first study to comprehensively investigate the influence of ESG controversies and their moderating effect in the context of the equity and debt capital cost for European listed companies. The findings contribute to corporate practice and empirically support legitimacy and stakeholder theories. Companies can utilise the results to proactively enhance their internal policies and behaviour to align with ESG practices and avoid ESG controversies, which will translate into reduced equity capital costs for shareholders and a lower cost of debt capital charged by creditors.

Links

MUNI/A/1373/2022, interní kód MU

Name: Alternativní finance a moderní přístupy ve financích

Investor: Masaryk University, Alternative Finance and Modern Approaches in Finance

MUNI/A/1576/2023, interní kód MU

Name: Moderní aktiva a vliv ukazatelů ESG ve finančním managementu obchodních korporací

Investor: Masaryk University, Modern Assets and the Impact of ESG Indicators on Corporate Financial Management

Citovat

HAMPL, Filip and Dagmar VÁGNEROVÁ LINNERTOVÁ. How do ESG controversies moderate the nexus between ESG performance and cost of capital? Evidence from European listed companies. MANAGERIAL FINANCE. ENGLAND: EMERALD GROUP PUBLISHING LTD, 2024, vol. 50, No 10, p. 1727-1746. ISSN 0307-4358. Available from: https://dx.doi.org/10.1108/MF-12-2023-0762.

@article{2321298,
   author = {Hampl, Filip and Vágnerová Linnertová, Dagmar},
   article_location = {ENGLAND},
   article_number = {10},
   doi = {http://dx.doi.org/10.1108/MF-12-2023-0762},
   keywords = {ESG performance; controversies; responsibility; cost of equity; cost of debt; financing cost},
   language = {eng},
   issn = {0307-4358},
   journal = {MANAGERIAL FINANCE},
   title = {How do ESG controversies moderate the nexus between ESG performance and cost of capital? Evidence from European listed companies},
   url = {http://dx.doi.org/10.1108/MF-12-2023-0762},
   volume = {50},
   year = {2024}
}

TY  - JOUR
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AU  - Hampl, Filip - Vágnerová Linnertová, Dagmar
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TI  - How do ESG controversies moderate the nexus between ESG performance and cost of capital? Evidence from European listed companies
JF  - MANAGERIAL FINANCE
VL  - 50
IS  - 10
SP  - 1727-1746
EP  - 1727-1746
PB  - EMERALD GROUP PUBLISHING LTD
SN  - 03074358
KW  - ESG performance
KW  - controversies
KW  - responsibility
KW  - cost of equity
KW  - cost of debt
KW  - financing cost
UR  - http://dx.doi.org/10.1108/MF-12-2023-0762
N2  - This study aims to investigate the effect of ESG controversies and their moderating role in ESG performance and the cost of equity and overall, short-term and long-term debt capital relationship in European listed companies. The study employs two-way fixed effects panel linear regression models on the balanced longitudinal dataset of 231 European non-financial companies listed in the MSCI Europe Index in 2017–2022. To check the robustness, the study utilises the fixed effects logistic regression models with heteroskedasticity-consistent standard errors. The study reveals the significant effect of ESG performance (negative) and ESG controversies (negative) on the cost of debt capital and the substantial moderating effect of ESG controversies (positive). Additionally, it provides empirical evidence of the crossover moderating effect of ESG controversies in ESG performance and cost of equity relationship. To the best of the authors' knowledge, this is the first study to comprehensively investigate the influence of ESG controversies and their moderating effect in the context of the equity and debt capital cost for European listed companies. The findings contribute to corporate practice and empirically support legitimacy and stakeholder theories. Companies can utilise the results to proactively enhance their internal policies and behaviour to align with ESG practices and avoid ESG controversies, which will translate into reduced equity capital costs for shareholders and a lower cost of debt capital charged by creditors.
ER  -

HAMPL, Filip and Dagmar VÁGNEROVÁ LINNERTOVÁ. How do ESG controversies moderate the nexus between ESG performance and cost of capital? Evidence from European listed companies. \textit{MANAGERIAL FINANCE}. ENGLAND: EMERALD GROUP PUBLISHING LTD, 2024, vol.~50, No~10, p.~1727-1746. ISSN~0307-4358. Available from: https://dx.doi.org/10.1108/MF-12-2023-0762.

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