ESG performance and investment efficiency: The impact of information asymmetry

Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F70883521%3A28120%2F24%3A63581898" target="_blank" >RIV/70883521:28120/24:63581898 - isvavai.cz</a>
Result on the web
<a href="https://www.sciencedirect.com/science/article/pii/S1042443123001877" target="_blank" >https://www.sciencedirect.com/science/article/pii/S1042443123001877</a>
DOI - Digital Object Identifier
<a href="http://dx.doi.org/10.1016/j.intfin.2023.101919" target="_blank" >10.1016/j.intfin.2023.101919</a>

Result language
angličtina
Original language name
ESG performance and investment efficiency: The impact of information asymmetry
Original language description
This paper investigates the relationship between firms' engagement in environmental, social, and governance (ESG) activities and corporate investment efficiency, using 1,094 firms from 21 countries in Europe, covering the years 2002–2019. We conduct our estimations using fixed effects panel data techniques and address potential endogeneity with instrumental variables (IV) estimations. We provide evidence that overall ESG engagement is positively and significantly associated with investment efficiency. Analyzing overinvestment and underinvestment scenarios shows that ESG engagement decreases only overinvestment problems. Within the underinvestment scenario, we observe that ESG engagement is beneficial only for firms with higher information asymmetries. Thus, information asymmetry matters in the underinvestment case. We next show that four firm-level channels—information asymmetry, financial constraints, cash flows, and risk—link ESG performance to investment inefficiency. Additional analysis shows that firms with extreme ESG scores (i.e., very low and very high) do not experience significant reductions in investment inefficiency. Altogether, our findings draw attention to the critical role of ESG performance and information asymmetry in determining corporate investment efficiency.
Czech name
—
Czech description
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Type
J<sub>imp</sub> - Article in a specialist periodical, which is included in the Web of Science database
CEP classification
—
OECD FORD branch
50204 - Business and management

Publication year
2024
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Name of the periodical
Journal of International Financial Markets, Institutions and Money
ISSN
1042-4431
e-ISSN
1873-0612
Volume of the periodical
91
Issue of the periodical within the volume
neuvedeno
Country of publishing house
NL - THE KINGDOM OF THE NETHERLANDS
Number of pages
19
Pages from-to
—
UT code for WoS article
001176577700001
EID of the result in the Scopus database
2-s2.0-85183180784

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