The value effect of sustainability: evidence from Latin American ESG bond market

We use the event study methodology to examine the effect of 115 environmental, social, and governance (ESG) bond issuances on the stock price of Latin American listed firms over the period 2016–2022. Consistent with the signaling theory, firms sending a signal of commitment to sustainability obtain a positive and significant average Cumulative Abnormal Return (CAR) of 1.97% during an event window of 18 days. The CAR is higher for first-time issuers, reaching 2.28%. Firms with smaller and more diverse boards are associated with higher CARs. However, ownership concentration reduces the CARs due to the potential misbehavior and expropriation risk from controlling shareholders. These results suggest that firm-level corporate governance mechanisms are critical to the ESG bonds signaling effect. Overall, our findings indicate that investors in Latin American capital markets positively value the reduction of information asymmetries regarding firms’ sustainability efforts, especially in a firm that mitigates potential agency conflicts.

• Autores: Arévalo, Guillermo; González Ferrero, Maximiliano; Guzmán Vásquez, Alexander; Trujillo Dávila, María Andrea
• Tipo de recurso: Article of investigation
• Fecha de publicación: 2024
• Institución: Colegio de Estudios Superiores de Administración
• Repositorio: Repositorio CESA
• Idioma: eng
• OAI Identifier: oai:repository.cesa.edu.co:10726/5786
• Acceso en línea: http://hdl.handle.net/10726/5786; https://doi.org/10.1080/20430795.2024.2344527
• Palabra clave: ESG bonds; Signaling theory; Information asymmetry; Stock prices; Latin American capital market
• License: Abierto (Texto Completo)