ESG performance and investment efficiency: The impact of information asymmetry

IF 5.4 2区经济学 Q1 BUSINESS, FINANCE

Journal of International Financial Markets Institutions & Money Pub Date : 2023-12-26 DOI:10.1016/j.intfin.2023.101919

Seda Bilyay-Erdogan , Gamze Ozturk Danisman , Ender Demir

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Abstract

This paper investigates the relationship between firms' engagement in environmental, social, and governance (ESG) activities and corporate investment efficiency, using 1,094 firms from 21 countries in Europe, covering the years 2002–2019. We conduct our estimations using fixed effects panel data techniques and address potential endogeneity with instrumental variables (IV) estimations. We provide evidence that overall ESG engagement is positively and significantly associated with investment efficiency. Analyzing overinvestment and underinvestment scenarios shows that ESG engagement decreases only overinvestment problems. Within the underinvestment scenario, we observe that ESG engagement is beneficial only for firms with higher information asymmetries. Thus, information asymmetry matters in the underinvestment case. We next show that four firm-level channels—information asymmetry, financial constraints, cash flows, and risk—link ESG performance to investment inefficiency. Additional analysis shows that firms with extreme ESG scores (i.e., very low and very high) do not experience significant reductions in investment inefficiency. Altogether, our findings draw attention to the critical role of ESG performance and information asymmetry in determining corporate investment efficiency.

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环境、社会和公司治理绩效与投资效率：信息不对称的影响

本文以欧洲 21 个国家的 1094 家公司为研究对象，涵盖 2002-2019 年，探讨了公司参与环境、社会和治理（ESG）活动与公司投资效率之间的关系。我们使用固定效应面板数据技术进行了估计，并通过工具变量（IV）估计解决了潜在的内生性问题。我们提供的证据表明，整体 ESG 参与度与投资效率呈显著正相关。对过度投资和投资不足情景的分析表明，ESG 参与只减少了过度投资问题。在投资不足的情况下，我们发现 ESG 参与只对信息不对称程度较高的公司有利。因此，在投资不足的情况下，信息不对称很重要。接下来，我们表明，信息不对称、财务约束、现金流和风险这四个企业层面的渠道将 ESG 表现与投资低效联系在一起。其他分析表明，ESG得分极高（即极低和极高）的公司投资效率并没有显著降低。总之，我们的研究结果提醒人们注意环境、社会和公司治理绩效以及信息不对称在决定企业投资效率方面的关键作用。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

Journal of International Financial Markets Institutions & Money Multiple-

CiteScore

6.60

自引率

10.00%

发文量

142

期刊介绍： International trade, financing and investments, and the related cash and credit transactions, have grown at an extremely rapid pace in recent years. The international monetary system has continued to evolve to accommodate the need for foreign-currency denominated transactions and in the process has provided opportunities for its ongoing observation and study. The purpose of the Journal of International Financial Markets, Institutions & Money is to publish rigorous, original articles dealing with the international aspects of financial markets, institutions and money. Theoretical/conceptual and empirical papers providing meaningful insights into the subject areas will be considered. The following topic areas, although not exhaustive, are representative of the coverage in this Journal. • International financial markets • International securities markets • Foreign exchange markets • Eurocurrency markets • International syndications • Term structures of Eurocurrency rates • Determination of exchange rates • Information, speculation and parity • Forward rates and swaps • International payment mechanisms • International commercial banking; • International investment banking • Central bank intervention • International monetary systems • Balance of payments.