IDEAS home Printed from https://ideas.repec.org/p/kob/dpaper/dp2023-03.html
   My bibliography  Save this paper

ESG Incentives and Attracting Socially Responsible Capital

Author

Listed:
  • Meg Adachi-Sato

    (Research Institute for Economics & Business Administration, Kobe University, JAPAN and Faculty of Business Administration and Accountancy, Khon Kaen University, THAILAND)

Abstract

This study examines how for-profit firms finance capital from investors through environmental, social, and governance (ESG) effort. It examines a situation with two types of investors: socially responsible and for-profit investors. In this scenario, firms outnumber all investors in the market and they must attract socially responsible investors to successfully obtain the capital they require. Regardless of whether socially responsible investors' search has significant effects, this study demonstrates that when a firm is willing to take ESG actions, regulators aiming to promote ESG may encourage investors to prioritize ESG performance in their investment choices; meanwhile, strengthening shareholders' rights or promoting corporate governance reform may not necessarily be ideal for them.

Suggested Citation

  • Meg Adachi-Sato, 2023. "ESG Incentives and Attracting Socially Responsible Capital," Discussion Paper Series DP2023-03, Research Institute for Economics & Business Administration, Kobe University, revised Aug 2023.
    • Handle: RePEc:kob:dpaper:dp2023-03
    as

    Download full text from publisher

    File URL: https://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/DP2023-03.pdf
    File Function: Revised version, 2023
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Pástor, Ľuboš & Stambaugh, Robert F. & Taylor, Lucian A., 2021. "Sustainable investing in equilibrium," Journal of Financial Economics, Elsevier, vol. 142(2), pages 550-571.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Karim, Sitara & Naeem, Muhammad Abubakr & Lucey, Brian M., 2022. "Do ethics outpace sins?," Finance Research Letters, Elsevier, vol. 47(PB).
    2. Ciciretti, Rocco & Dalò, Ambrogio & Dam, Lammertjan, 2023. "The contributions of betas versus characteristics to the ESG premium," Journal of Empirical Finance, Elsevier, vol. 71(C), pages 104-124.
    3. Döttling, Robin & Lam, Adrian, 2023. "Does Monetary Policy Shape the Path to Carbon Neutrality?," OSF Preprints kqdar, Center for Open Science.
    4. Cauthorn, Thomas & Dumrose, Maurice & Eckert, Julia & Klein, Christian & Zwergel, Bernhard, 2023. "Rating changes revisited: New evidence on short-term ESG momentum," Finance Research Letters, Elsevier, vol. 54(C).
    5. Jorge M. Uribe, 2023. ""Fiscal crises and climate change"," IREA Working Papers 202303, University of Barcelona, Research Institute of Applied Economics, revised Feb 2023.
    6. Ľuboš Pástor & M Blair Vorsatz & Jeffrey Pontiff, 0. "Mutual Fund Performance and Flows during the COVID-19 Crisis," The Review of Asset Pricing Studies, Society for Financial Studies, vol. 10(4), pages 791-833.
    7. Lars Hornuf & Gül Yüksel, 2022. "The Performance of Socially Responsible Investments: A Meta-Analysis," CESifo Working Paper Series 9724, CESifo.
    8. Iulia Lupu & Gheorghe Hurduzeu & Radu Lupu, 2022. "How Is the ESG Reflected in European Financial Stability?," Sustainability, MDPI, vol. 14(16), pages 1-14, August.
    9. Gillan, Stuart L. & Koch, Andrew & Starks, Laura T., 2021. "Firms and social responsibility: A review of ESG and CSR research in corporate finance," Journal of Corporate Finance, Elsevier, vol. 66(C).
    10. Théophile Anquetin & Guillaume Coqueret & Bertrand Tavin & Lou Welgryn, 2022. "Scopes of carbon emissions and their impact on green portfolios," Post-Print hal-04144612, HAL.
    11. Jacques Bughin & Francis Hinterman & Sybille Berjoan, 2022. "A Good Crisis (not) Wasted: How Exploiting and Expanding Dynamic Capabilities Shape Corporate Performance During the Covid Pandemic," Working Papers TIMES² WP2022-051, ULB -- Universite Libre de Bruxelles.
    12. Dong, Xiyong & Xiong, Youlin & Nie, Siyue & Yoon, Seong-Min, 2023. "Can bonds hedge stock market risks? Green bonds vs conventional bonds," Finance Research Letters, Elsevier, vol. 52(C).
    13. Lioui, Abraham & Tarelli, Andrea, 2022. "Chasing the ESG factor," Journal of Banking & Finance, Elsevier, vol. 139(C).
    14. Cohen, Shira & Kadach, Igor & Ormazabal, Gaizka & Reichelstein, Stefan, 2022. "Executive compensation tied to ESG performance: International evidence," ZEW Discussion Papers 22-051, ZEW - Leibniz Centre for European Economic Research.
    15. Jootae Kim & Sungjin Son & Ick Jin, 2022. "The Effects of Shareholding of the National Pension Fund on Environmental, Social, Governance, and Financial Performance: Evidence from the Korean Manufacturing Industry," Sustainability, MDPI, vol. 14(18), pages 1-17, September.
    16. Andrea Cipollini & Fabio Parla, 2023. "Climate risk and investment in equities in Europe: a Panel SVAR approach," Centro Studi di Banca e Finanza (CEFIN) (Center for Studies in Banking and Finance) 0093, Universita di Modena e Reggio Emilia, Dipartimento di Economia "Marco Biagi".
    17. Reboredo, Juan C. & Ugolini, Andrea, 2022. "Climate transition risk, profitability and stock prices," International Review of Financial Analysis, Elsevier, vol. 83(C).
    18. Shira Cohen & Igor Kadach & Gaizka Ormazabal & Stefan Reichelstein, 2023. "Executive Compensation Tied to ESG Performance: International Evidence," Journal of Accounting Research, Wiley Blackwell, vol. 61(3), pages 805-853, June.
    19. David Ardia & Keven Bluteau & Kris Boudt & Koen Inghelbrecht, 2020. "Climate change concerns and the performance of green versus brown stocks," Working Paper Research 395, National Bank of Belgium.
    20. Ferriani, Fabrizio, 2023. "Issuing bonds during the Covid-19 pandemic: Was there an ESG premium?," International Review of Financial Analysis, Elsevier, vol. 88(C).

    More about this item

    Keywords

    ESG; Matching intensity; Search; Social impact; Socially responsible investor;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kob:dpaper:dp2023-03. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Office of Promoting Research Collaboration, Research Institute for Economics & Business Administration, Kobe University (email available below). General contact details of provider: https://edirc.repec.org/data/rikobjp.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.