ISSN: 2225-8329
Open access
This study investigates whether lending institutions in Italy reward firms for their environmental, social, and governance (ESG) performance and disclosure by lowering their cost of debt capital. Especially after the Covid 19 pandemic, investors as well as other stakeholders increasingly demand both nonfinancial reports and standard financial statements. So,the integration of environmental and ethical criteria into the evaluation of a corporation is a theme widely accepted by socially responsible investors and stakeholders.In other hands, the banking system has started to incorporate ethical and social indicators into the decision-making process. Our paper finds lending institutions value ESG performance, integrating sustainability factors in their making-decision process. In this sense, we show evidence that organizations with stronger level of ESG performance have better credit conditions, through a lower cost of debt.
Aevoae, G. M., Andrie?, A. M., Ongena, S., & Sprincean, N. (2023). ESG and systemic risk. Applied Economics, 55(27), 3085-3109.
Agnese, P., & Giacomini, E. (2023). Bank's funding costs: Do ESG factors really matter?. Finance Research Letters, 51, 103437.
Al-Shaer, H., Zaman, M., & Albitar, K. (2024). CEO gender, critical mass of board gender diversity and ESG performance: UK evidence. Journal of Accounting Literature.
Ameer, R., & Othman, R. (2012). Sustainability practices and corporate financial performance: A study based on the top global corporations. Journal of business ethics, 108, 61-79.
Andrie?, A. M., & Sprincean, N. (2023). ESG performance and banks’ funding costs. Finance research letters, 54, 103811.
Apergis, N., Poufinas, T., & Antonopoulos, A. (2022). ESG scores and cost of debt. Energy Economics, 112, 106186.
Artis, A. (2017). Social and solidarity finance: A conceptual approach. Research in International Business and Finance, 39, 737-749. R
Attig, N., El Ghoul, S., Guedhami, O., & Suh, J. (2013). Corporate social responsibility and credit ratings. Journal of business ethics, 117, 679-694.
Aydo?mu?, M., Gülay, G., & Ergun, K. (2022). Impact of ESG performance on firm value and profitability. Borsa Istanbul Review, 22, S119-S127.
Birindelli, G., Ferretti, P., Intonti, M., & Iannuzzi, A. P. (2015). On the drivers of corporate social responsibility in banks: evidence from an ethical rating model. Journal of Management & Governance, 19, 303-340.
Bissoondoyal-Bheenick, E., Brooks, R., & Do, H. X. (2023). ESG and firm performance: The role of size and media channels. Economic Modelling, 121, 106203.
Cadbury, A., (1992), The Financial Aspects of Corporate Governance (Cadbury Report), London, UK: The Committee on the Financial Aspect of Corporate Governance (The Cadbury Committee) and Gee and Co, Ltd, pp.
Campanella, F., Gangi, F., Mustilli, M., & Serino, L. (2020). The effects of the credit selection criteria on non-performing loans: evidence on small and large banks in Italy. Meditari Accountancy Research, 28(2), 251-275.
Campanella, F., Serino, L., Battisti, E., Giakoumelou, A., & Karasamani, I. (2023). FinTech in the financial system: Towards a capital-intensive and high competence human capital reality?. Journal of Business Research, 155, 113376.
Campanella, F., Serino, L., Crisci, A., & D'Ambra, A. (2021). The role of corporate governance in environmental policy disclosure and sustainable development. Generalized estimating equations in longitudinal count data analysis. Corporate Social Responsibility and Environmental Management, 28(1), 474-484.
Crifo, P., Diaye, M. A., & Oueghlissi, R. (2017). The effect of countries’ ESG ratings on their sovereign borrowing costs. The Quarterly Review of Economics and Finance, 66, 13-20.
D’Amato, V., D’Ecclesia, R., & Levantesi, S. (2022). ESG score prediction through random forest algorithm. Computational Management Science, 19(2), 347-373.
D’Apolito, E., Galletta, S., Iannuzzi, A. P., & Labini, S. S. (2024). Sustainability and bank credit access: New evidence from Italian SMEs. Research in International Business and Finance, 69, 102242.
Disli, M., Yilmaz, M. K., & Mohamed, F. F. M. (2022). Board characteristics and sustainability performance: empirical evidence from emerging markets. Sustainability Accounting, Management and Policy Journal, 13(4), 929-952.
Dyck, A., Lins, K. V., Roth, L., & Wagner, H. F. (2019). Do institutional investors drive corporate social responsibility? International evidence. Journal of financial economics, 131(3), 693-714.
Eliwa, Y., Aboud, A., & Saleh, A. (2021). ESG practices and the cost of debt: Evidence from EU countries. Critical Perspectives on Accounting, 79, 102097.
Elsayih, J., Datt, R., & Hamid, A. (2021). CEO characteristics: do they matter for carbon performance? An empirical investigation of Australian firms. Social Responsibility Journal, 17(8), 1279-1298.
Erragragui, E. (2018). Do creditors price firms’ environmental, social and governance risks?. Research in International Business and Finance, 45, 197-207.
European Investment Bank (Ed.). (2023). The economic appraisal of investment projects at the EIB. European Investment Bank.
Fatima, T., & Elbanna, S. (2023). Corporate social responsibility (CSR) implementation: A review and a research agenda towards an integrative framework. Journal of Business Ethics, 183(1), 105-121.
Gandhi, N. S., Thanki, S. J., & Thakkar, J. J. (2018). Ranking of drivers for integrated lean-green manufacturing for Indian manufacturing SMEs. Journal of Cleaner Production, 171, 675-689.
Garcia, A. S., Mendes-Da-Silva, W., & Orsato, R. J. (2017). Sensitive industries produce better ESG performance: Evidence from emerging markets. Journal of cleaner production, 150, 135-147.
Govindan, K., Kilic, M., Uyar, A., & Karaman, A. S. (2021). Drivers and value-relevance of CSR performance in the logistics sector: A cross-country firm-level investigation. International Journal of Production Economics, 231, 107835.
Hao, J., & He, F. (2022). Corporate social responsibility (CSR) performance and green innovation: Evidence from China. Finance Research Letters, 48, 102889.
Hasan, I., Hoi, C. K., Wu, Q., & Zhang, H. (2017). Social capital and debt contracting: Evidence from bank loans and public bonds. Journal of Financial and Quantitative Analysis, 52(3), 1017-1047.
Hoepner, A., Oikonomou, I., Scholtens, B., & Schröder, M. (2016). The effects of corporate and country sustainability characteristics on the cost of debt: An international investigation. Journal of Business Finance & Accounting, 43(1-2), 158-190.
Ioannou, I., & Serafeim, G. (2015). The impact of corporate social responsibility on investment recommendations: Analysts' perceptions and shifting institutional logics. Strategic management journal, 36(7), 1053-1081.
Kara, A., Nanteza, A., Ozkan, A., & Yildiz, Y. (2022). Board gender diversity and responsible banking during the COVID-19 pandemic. Journal of Corporate Finance, 74, 102213.
Kennedy, Peter, 1998. A Guide to Econometrics. Oxford: Blackwell
Lagazio, C., Persico, L., & Querci, F. (2021). Public guarantees to SME lending: Do broader eligibility criteria pay off?. Journal of Banking & Finance, 133, 106287.
Liu, S., Jin, J., & Nainar, K. (2023). Does ESG performance reduce banks’ nonperforming loans?. Finance Research Letters, 55, 103859.
Menicucci, E., & Paolucci, G. (2022). Board diversity and ESG performance: Evidence from the Italian banking sector. Sustainability, 14(20), 13447.
Nadeem, M., Bahadar, S., Gull, A. A., & Iqbal, U. (2020). Are women eco?friendly? Board gender diversity and environmental innovation. Business Strategy and the Environment, 29(8), 3146-3161.
Nuber, C., & Velte, P. (2021). Board gender diversity and carbon emissions: European evidence on curvilinear relationships and critical mass. Business Strategy and the Environment, 30(4), 1958-1992.
Ortas, E., Gallego?Alvarez, I., & Álvarez Etxeberria, I. (2015). Financial factors influencing the quality of corporate social responsibility and environmental management disclosure: A quantile regression approach. Corporate Social Responsibility and Environmental Management, 22(6), 362-380.
Pekovic, S., & Vogt, S. (2021). The fit between corporate social responsibility and corporate governance: the impact on a firm’s financial performance. Review of Managerial Science, 15(4), 1095-1125.
Pozzoli, M., Pagani, A., & Paolone, F. (2022). The impact of audit committee characteristics on ESG performance in the European Union member states: Empirical evidence before and during the COVID-19 pandemic. Journal of Cleaner Production, 371, 133411.
Quintiliani, A. (2019). Impact of Financial Transparency on SMEs’ Value. Journal of Applied Finance & Banking, 9(6), 285-300.
Stellner, C., Klein, C., & Zwergel, B. (2015). Corporate social responsibility and Eurozone corporate bonds: The moderating role of country sustainability. Journal of Banking & Finance, 59, 538-549.
Raimo, N., Caragnano, A., Zito, M., Vitolla, F., & Mariani, M. (2021). Extending the benefits of ESG disclosure: The effect on the cost of debt financing. Corporate Social Responsibility and Environmental Management, 28(4), 1412-1421.
Russo, A., & Tencati, A. (2009). Formal vs. informal CSR strategies: Evidence from Italian micro, small, medium-sized, and large firms. Journal of Business Ethics, 85, 339-353.
Tingbani, I., Chithambo, L., Tauringana, V., & Papanikolaou, N. (2020). Board gender diversity, environmental committee and greenhouse gas voluntary disclosures. Business Strategy and the Environment, 29(6), 2194-2210.
Wang, Y., & Berens, G. (2015). The impact of four types of corporate social performance on reputation and financial performance. Journal of Business Ethics, 131, 337-359.
Weber, O., Scholz, R. W., & Michalik, G. (2010). Incorporating sustainability criteria into credit risk management. Business strategy and the environment, 19(1), 39-50.
Weber, A. M., Soreni, N., & Noseworthy, M. D. (2014). A preliminary study on the effects of acute ethanol ingestion on default mode network and temporal fractal properties of the brain. Magnetic Resonance Materials in Physics, Biology and Medicine, 27, 291-301.
Zhou, G., Liu, L., & Luo, S. (2022). Sustainable development, ESG performance and company market value: Mediating effect of financial performance. Business Strategy and the Environment, 31(7), 3371-3387.
(Serino & Campanella, 2024)
Serino, L., & Campanella, F. (2024). ESG Practices and the Cost of Debt: Evidence from Italian SMEs. International Journal of Academic Research in Accounting Finance and Management Sciences, 14(3), 51–61.
Copyright: © 2024 The Author(s)
Published by HRMARS (www.hrmars.com)
This article is published under the Creative Commons Attribution (CC BY 4.0) license. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this license may be seen at: http://creativecommons.org/licences/by/4.0/legalcode