ESG Scores and Secondary Equity Offerings: A Case of Secondary Equity Offering in the US

Abstract

The relationship between environmental, social, and governance (ESG) scores and secondary equity offerings (SEO) has received limited attention in the literature. This thesis explores this topic using a sample of US-listed firms and applies various econometric methods. We find that ESG scores are inconsistent measures for a firm’s performance in the event of an SEO and that they do not affect the market reaction. Additionally, we find that CO2 emissions have a negative impact on the abnormal returns of firms issuing secondary equity and that firms with high ESG scores are less likely to issue equity to raise capital and more likely to use the proceeds for dividend payments. We conclude that ESG scores are unreliable predictors of SEO performance, and find evidence for the probability of issuing equity and allocation of proceeds.