Environmental performance and credit ratings: a transatlantic study

Hu, H., Lazar, E. ORCID: https://orcid.org/0000-0002-8761-0754, Pan, J. and Wang, S. ORCID: https://orcid.org/0000-0003-2113-5521 (2024) Environmental performance and credit ratings: a transatlantic study. International Review of Financial Analysis. 103635. ISSN 1873-8079 doi: 10.1016/j.irfa.2024.103635

Abstract/Summary

This paper investigates the impact of the firms’ environmental performance on their credit rating. To this end, we conduct a transatlantic study covering companies in the United States (US) and in the European Union (EU). Our study reveals that firms’ environmental improvements positively contribute to their credit ratings. However, this effect varies between the US and the EU. If US and European firms enhance their environmental performance by the same scale, the former’s creditworthiness benefits more than the latter’s. Additionally, we show that improvements in environmental performance affect credit ratings linearly in the US but nonlinearly in the EU. These findings shed light on the implications of the firms’ environmental performance and provide critical insights into the impact of corporate sustainability indicators on credit ratings.

Item Type	Article
URI	https://reading-clone.eprints-hosting.org/id/eprint/118664
Identification Number/DOI	10.1016/j.irfa.2024.103635
Refereed	Yes
Divisions	Henley Business School > Finance and Accounting Arts, Humanities and Social Science > School of Politics, Economics and International Relations > Economics
Publisher	Elsevier
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