The Relationship of ESG Component Scores and Creditworthiness on Publicly Listed Firms in the ASEAN-5 Countries

• Main Authors: Alvarez, Shayne Jefferson, Cu, Charlene Ashley C., Lamberte, Lance L., Yap, Patrick Henry G., Castillo, Paulynne J., Raymundo, Roberto B., Tanchuco, Joel Q.
• Format: text
• Published: Animo Repository 2024
• Subjects: ESG; creditworthiness; ASEAN; Business Law, Public Responsibility, and Ethics; Growth and Development
• Online Access: https://animorepository.dlsu.edu.ph/res_aki/189; https://animorepository.dlsu.edu.ph/context/res_aki/article/1190/viewcontent/DLSU_AKI_Policy_Brief__2024_01_024.pdf
• Institution: De La Salle University

ESG ratings are crucial for ASEAN-5 businesses' creditworthiness. While existing studies often concentrate on ESG's impact on financial performance or general pillars, a detailed exploration of the 10 specific ESG components in the ASEAN-5 is lacking. This study addresses this gap, examining how ESG ratings affect a company's creditworthiness (probability of default) in publicly traded companies across the ASEAN-5 countries while considering potential heterogeneity. Utilizing annual data from 2013-2022 for 10 ESG components and Eikon Refinitiv's probability of default via the Starmine Combined Credit Risk Model across ASEAN-5, the study employs a panel OLS regression model with White's Robust Standard Errors. Significant impacts were observed in various ESG components across ASEAN countries, such as Community in the entire ASEAN region, Management in Malaysia, and Community, Product Responsibility, and CSR Strategy in the Philippines. These findings suggest a negative relationship with the probability of default, enhancing creditworthiness while considering firm and year-fixed effects. Policy recommendations include responsible community practices, transparent ESG integration, strong governance compliance, and investments in product quality and safety.