Primary Corporate Bond Markets and Social Responsibility

We document that good ES-performance is rewarded in primary bond markets by lower credit spreads. This effect is strongest for low-rated bonds and for firms in manufacturing, agriculture, mining and construction. However, not all ES-dimensions are equally important. The above results are driven mostly by the product-related dimension and to a lesser extent by the employee-related dimension. Environment-related aspects only seem to matter for those industries with largest exposure to environmental risks. Finally, we neither find that the above results are driven by crisis periods nor pronounced dynamics reflecting the growing interest in ESG. Overall, our evidence suggests that some ES-dimensions capture information that is relevant for default risk.