This paper empirically analyzed the correlation between corporate value, debt cost, and credit rating of ESG-rated companies by the Korea Corporate Governance Service for companies listed on the Korea Exchange from 2013 to 2020. To this end, hypotheses were established and panel regression analysis ...
This paper empirically analyzed the correlation between corporate value, debt cost, and credit rating of ESG-rated companies by the Korea Corporate Governance Service for companies listed on the Korea Exchange from 2013 to 2020. To this end, hypotheses were established and panel regression analysis and panel logit analysis were used. ESG ratings were classified into good and bad companies, and a more in-depth analysis was conducted by dividing them into integrated ratings and detailed items. As a proxy for corporate value, ROE and ROA, which are performance indicators in the accounting books, were used, and Tobin Q was used as the corporate value in terms of market participants. In addition, in order to check the explanatory power of ESG's effect on the cost of debt, the dependent variable was selected as the cost of debt to understand the effect of ESG on the cost of debt according to the characteristics of debt. The empirical analysis results for this study are as follows.
First, ESG was found to have a differential effect on business performance and corporate value. This result supports the studies of Wright and Ferris (1997) and Brammer et al. (2006). ROE and ROA in the integrated sector were found to have insignificant values, and Tobin Q was found to have a negative (-) effect in the environmental and social sectors. This can be said to be the same result as the research conducted by Im Wook-bin (2019), who confirmed that ESG activities can be negative on corporate value by recognizing them as costs in the short term. However, some significant positive (+) relationships were confirmed in the detailed items. In the environmental management/environmental performance of the environmental sector, workers and consumers in the social sector, and publicly disclosed evaluation items in the corporate governance sector, the correlation was consistently positive (+). This suggests that it is important to understand the explanatory power of ESG in detail, and that companies should actively respond to environmental issues such as climate change and strive for sound and transparent disclosure, smooth communication with consumers, and fair treatment of work. .
Second, it was confirmed that a good ESG rating as a determinant of the interest rate borrowed from financial institutions may cause insignificant or short-term cost increases. It can be concluded that financial institutions with the characteristics of private debt do not use ESG, which is a non-financial value, as meaningful information in executing the corporate loan, as opposed to the market bond procurement such as public debt. Also, companies with low financial soundness may not reduce their capital cost even if their ESG ratings are good, and it can be judged that debt costs will decrease when ESG improvement and corporate financial soundness increase at the same time. In other words, it was confirmed that a company's good financial soundness is an important prerequisite for the relationship between ESG and cost of capital.
Third, as non-financial information, ESG confirmed a significant positive (+) relation to corporate bond credit rating evaluation. A good ESG rating plays a positive role in the overall environmental strategy and social and governance sectors in the environmental sector, which supports the research results of Park Jun-ryeong (2011). In other words, it can be inferred that credit rating agencies reflect ESG ratings, which are non-financial information, as well as corporate financial data in accounting, in calculating credit ratings, and in particular, reflect social and governance structures more meaningfully than environmental ones.
This paper empirically analyzed the correlation between corporate value, debt cost, and credit rating of ESG-rated companies by the Korea Corporate Governance Service for companies listed on the Korea Exchange from 2013 to 2020. To this end, hypotheses were established and panel regression analysis and panel logit analysis were used. ESG ratings were classified into good and bad companies, and a more in-depth analysis was conducted by dividing them into integrated ratings and detailed items. As a proxy for corporate value, ROE and ROA, which are performance indicators in the accounting books, were used, and Tobin Q was used as the corporate value in terms of market participants. In addition, in order to check the explanatory power of ESG's effect on the cost of debt, the dependent variable was selected as the cost of debt to understand the effect of ESG on the cost of debt according to the characteristics of debt. The empirical analysis results for this study are as follows.
First, ESG was found to have a differential effect on business performance and corporate value. This result supports the studies of Wright and Ferris (1997) and Brammer et al. (2006). ROE and ROA in the integrated sector were found to have insignificant values, and Tobin Q was found to have a negative (-) effect in the environmental and social sectors. This can be said to be the same result as the research conducted by Im Wook-bin (2019), who confirmed that ESG activities can be negative on corporate value by recognizing them as costs in the short term. However, some significant positive (+) relationships were confirmed in the detailed items. In the environmental management/environmental performance of the environmental sector, workers and consumers in the social sector, and publicly disclosed evaluation items in the corporate governance sector, the correlation was consistently positive (+). This suggests that it is important to understand the explanatory power of ESG in detail, and that companies should actively respond to environmental issues such as climate change and strive for sound and transparent disclosure, smooth communication with consumers, and fair treatment of work. .
Second, it was confirmed that a good ESG rating as a determinant of the interest rate borrowed from financial institutions may cause insignificant or short-term cost increases. It can be concluded that financial institutions with the characteristics of private debt do not use ESG, which is a non-financial value, as meaningful information in executing the corporate loan, as opposed to the market bond procurement such as public debt. Also, companies with low financial soundness may not reduce their capital cost even if their ESG ratings are good, and it can be judged that debt costs will decrease when ESG improvement and corporate financial soundness increase at the same time. In other words, it was confirmed that a company's good financial soundness is an important prerequisite for the relationship between ESG and cost of capital.
Third, as non-financial information, ESG confirmed a significant positive (+) relation to corporate bond credit rating evaluation. A good ESG rating plays a positive role in the overall environmental strategy and social and governance sectors in the environmental sector, which supports the research results of Park Jun-ryeong (2011). In other words, it can be inferred that credit rating agencies reflect ESG ratings, which are non-financial information, as well as corporate financial data in accounting, in calculating credit ratings, and in particular, reflect social and governance structures more meaningfully than environmental ones.
주제어
#ESG Management Firm Value Corporate Bond Credit Rating Cost of Debt ESG Rating Financial Soundness
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