ESG performance and investment efficiency: The impact of information asymmetry

Kód výsledku v 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>

Výsledek na webu

<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>

Jazyk výsledku

angličtina

Název v původním jazyce

ESG performance and investment efficiency: The impact of information asymmetry

Popis výsledku v původním jazyce

This paper investigates the relationship between firms&apos; 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.

Název v anglickém jazyce

ESG performance and investment efficiency: The impact of information asymmetry

Popis výsledku anglicky

This paper investigates the relationship between firms&apos; 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.

Druh

J_imp - Článek v periodiku v databázi Web of Science

CEP obor

—

OECD FORD obor

50204 - Business and management

Projekt

—

Návaznosti

V - Vyzkumna aktivita podporovana z jinych verejnych zdroju

Rok uplatnění

2024

Kód důvěrnosti údajů

S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Název periodika

Journal of International Financial Markets, Institutions and Money

ISSN

1042-4431

e-ISSN

1873-0612

Svazek periodika

91

Číslo periodika v rámci svazku

neuvedeno

Stát vydavatele periodika

NL - Nizozemsko

Počet stran výsledku

19

Strana od-do

—

Kód UT WoS článku

001176577700001

EID výsledku v databázi Scopus

2-s2.0-85183180784