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What is the relationship between ESG Performance and Financial Constraints? Evidence from Europe

Bolin, Mattias; Rana, Omar Shahzad
Master thesis
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https://hdl.handle.net/11250/2827787
Date
2021
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  • Master of Science [1530]
Abstract
The importance of the ESG and firm behavior connection has evolved rapidly in recent years. The introduction of EU’s Green Deal in 2020 la- beled Europe as a particularly interesting area for further research. Prior academic literature argued that ESG performance and financial constraints display a significant negative relation. This thesis investigates the rela- tionship between ESG performance and financial constraints for listed Eu- ropean firms from 2010 to 2019. The investigation was extended by the deconstruction of ESG to each respective E, S and G pillar scores, and eventually to a sub-category component level. We find robust evidence of a time consistent negative relationship between ESG performance and the financial constraints indices, WW, KZ and SA index. Our evidence sup- ports the proposition of high ESG scoring firms suffering less from financial constraints through a superior attraction of external capital. Furthermore, the results suggest Environmental and Social engagements to be the pri- mary enablers of the exhibited superior access, with an especial emphasize on climate and employee enhancing activities.

Key words: Financial Constraints, ESG Performance, Access to Finance, CSR, Environmental, Social and Governance (ESG), Europe
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Masteroppgave(MSc) in Master of Science in Finance - Handelshøyskolen BI, 2021
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Handelshøyskolen BI

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