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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

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    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.
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    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

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