ESG performance and investment efficiency: The impact of information asymmetry

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dc.authoridBilyay Erdogan, Seda/0000-0001-6701-4448
dc.contributor.authorBilyay-Erdogan, Seda
dc.contributor.authorDanisman, Gamze Ozturk
dc.contributor.authorDemir, Ender
dc.date.accessioned2024-07-18T20:42:44Z
dc.date.available2024-07-18T20:42:44Z
dc.date.issued2024
dc.departmentİstanbul Bilgi Üniversitesien_US
dc.description.abstractThis paper investigates the relationship between firms' engagement in environmental, social, and governance (ESG) activities and corporate investment efficiency, using 1,094 firms from 21 countries in Europe, covering the years 2002-2019. We conduct our estimations using fixed effects panel data techniques and address potential endogeneity with instrumental variables (IV) estimations. We provide evidence that overall ESG engagement is positively and significantly associated with investment efficiency. Analyzing overinvestment and underinvestment scenarios shows that ESG engagement decreases only overinvestment problems. Within the underinvestment scenario, we observe that ESG engagement is beneficial only for firms with higher information asymmetries. Thus, information asymmetry matters in the underinvestment case. We next show that four firm-level channels-information asymmetry, financial constraints, cash flows, and risk-link ESG performance to investment inefficiency. Additional analysis shows that firms with extreme ESG scores (i.e., very low and very high) do not experience significant reductions in investment inefficiency. Altogether, our findings draw attention to the critical role of ESG performance and information asymmetry in determining corporate investment efficiency.en_US
dc.identifier.doi10.1016/j.intfin.2023.101919
dc.identifier.issn1042-4431
dc.identifier.issn1873-0612
dc.identifier.scopus2-s2.0-85183180784en_US
dc.identifier.scopusqualityQ1en_US
dc.identifier.urihttps://doi.org/10.1016/j.intfin.2023.101919
dc.identifier.urihttps://hdl.handle.net/11411/7399
dc.identifier.volume91en_US
dc.identifier.wosWOS:001176577700001en_US
dc.identifier.wosqualityN/Aen_US
dc.indekslendigikaynakWeb of Scienceen_US
dc.indekslendigikaynakScopusen_US
dc.language.isoenen_US
dc.publisherElsevieren_US
dc.relation.ispartofJournal of International Financial Markets Institutions & Moneyen_US
dc.relation.publicationcategoryMakale - Uluslararası Hakemli Dergi - Kurum Öğretim Elemanıen_US
dc.rightsinfo:eu-repo/semantics/closedAccessen_US
dc.subjectEsg Performanceen_US
dc.subjectInvestment Efficiencyen_US
dc.subjectOverinvestmenten_US
dc.subjectUnderinvestmenten_US
dc.subjectInformation Asymmetryen_US
dc.subjectEuropeen_US
dc.subjectCorporate Social-Responsibilityen_US
dc.subjectFinancial-Reporting Qualityen_US
dc.subjectAgency Costsen_US
dc.subjectNonfinancial Disclosureen_US
dc.subjectRisk-Managementen_US
dc.subjectCash Flowen_US
dc.subjectFirmen_US
dc.subjectEquityen_US
dc.subjectInefficiencyen_US
dc.subjectConstraintsen_US
dc.titleESG performance and investment efficiency: The impact of information asymmetryen_US
dc.typeArticleen_US

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