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Publication Detailed Description
Journal Title
Applied Economics
Year (definitive publication)
2025
Language
English
Country
United Kingdom
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Abstract
This paper investigates how Environment, Social and Governance (ESG) performance affects the zero-leverage phenomenon. Using a sample of European-listed firms for the 2002–2020 period and bivariate probit models with partial observability, we find that a greater ESG performance decreases the firm’s propensity to have zero leverage. The negative effect of ESG performance on zero leverage is determined by creditors-related reasons and not by firms’ own decisions, since it only impacts significantly the supply of debt. Creditors seem to be willing to grant debt at more favourable conditions to firms with greater ESG performance. Using propensity score methods, we estimate that a greater ESG performance decreases a firm’s zero-leverage propensity by approximately 3.9% points.
Acknowledgements
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Keywords
Zero leverage,ESG performance,Bivariate probit models,Capital structure,PS methods
Fields of Science and Technology Classification
- Economics and Business - Social Sciences
Funding Records
| Funding Reference | Funding Entity |
|---|---|
| UIDB/04630/2020 | Fundação para a Ciência e a Tecnologia |
| UIDB/00315/2020 | Fundação para a Ciência e a Tecnologia |
| UIDB/04007/2020 | Fundação para a Ciência e a Tecnologia |
