Banks vs. markets : Are banks more effective in facilitating sustainability?

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dc.contributor Bank of Finland Newton, David P. Ongena, Steven Xie, Ru Zhao, Binru 2022-04-28T05:49:46Z 2022-04-28T05:49:46Z 2022
dc.identifier.isbn 978-952-323-408-6
dc.identifier.issn 1456-5889
dc.description.abstract Is bank- versus market-based financing different in its attitudes towards Environmental, Social, and Governance (ESG) risk? Using a novel sample covering 3,783 U.S. public firms from 2007 to 2020, we study how firm-level ESG risk affects its financing outcomes. We find that companies with higher ESG risk borrow less from banks than from markets, potentially to avoid bank monitoring and scrutiny. The Social and Governance components, in particular, matter. Furthermore, firms suffering higher numbers of negative ESG reputation shocks are less likely to continue to rely on bank credit in response to lenders' threats to end the lending arrangements. Finally, our results indicate that firms' ESG risk reduces after borrowing from banks but increases after bond issuance, suggesting that banks are more effective than public bond markets in shaping borrowers' ESG performance.
dc.format.extent 44
dc.language.iso ENG
dc.relation.ispartofseries BOFIT Discussion Papers
dc.subject Bofit-kokoelma
dc.subject kestävä rahoitus
dc.subject ESG
dc.subject.other ESG risk
dc.subject.other debt structure
dc.subject.other capital structure
dc.subject.other debt choices
dc.subject.other bank monitoring
dc.title Banks vs. markets : Are banks more effective in facilitating sustainability?
dc.type Paper
dc.identifier.urn URN:NBN:fi:bof-202204271172
dc.subject.jel G20
dc.subject.jel G21
dc.subject.jel G30
dc.subject.jel G32 BOFIT Discussion Papers
dc.series.year 2022
dc.series.number 5/2022
dc.series.sortingnumber 0005 27.4.2022
dc.subject.yso yritykset
dc.subject.yso rahoitus
dc.subject.yso riskit
dc.subject.yso kestävä kehitys
dc.subject.yso monitorointi
dc.subject.yso luotot
dc.subject.yso luotonanto
dc.subject.yso pankit
dc.subject.yso joukkovelkakirjat
dc.contributor.orgunit Bank of Finland Institute for Emerging Economies (BOFIT)
bof-internal.includedInCRIS 1
dc.type.okm D4

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