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ESG Disclosure, REIT Debt Financing and Firm Value

Using recently available GRESB ESG public disclosure data for REITs around the world, we examine how ESG disclosure is related to REIT debt financing and firm value. We find that REITs with higher levels of ESG disclosure have lower cost of debt, higher credit ratings, and higher unsecured debt to t...

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Autores principales: Feng, Zifeng, Wu, Zhonghua
Formato: Online Artículo Texto
Lenguaje:English
Publicado: Springer US 2021
Materias:
Acceso en línea:https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8390044/
http://dx.doi.org/10.1007/s11146-021-09857-x
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author Feng, Zifeng
Wu, Zhonghua
author_facet Feng, Zifeng
Wu, Zhonghua
author_sort Feng, Zifeng
collection PubMed
description Using recently available GRESB ESG public disclosure data for REITs around the world, we examine how ESG disclosure is related to REIT debt financing and firm value. We find that REITs with higher levels of ESG disclosure have lower cost of debt, higher credit ratings, and higher unsecured debt to total debt ratio, controlling for key firm characteristics. These findings suggest that improving ESG disclosure can help REITs to gain better access to the capital markets and enhance corporate financial flexibility, as lenders have paid close attention to a firm’s ESG disclosure and integrated evaluation of ESG factors into their lending decisions. Moreover, firm value of REITs is positively associated with their ESG disclosure level. When using the Covid-19 pandemic as a quasi-experimental setting, we find evidence that REITs with higher ESG disclosure levels before the pandemic exhibit higher firm value during the pandemic. These results indicate that investors do value active ESG disclosure by REITs. Additional analyses show that ESG disclosure level is sensitive to institutional ownership, implying that institutional investors may drive REIT ESG disclosure efforts. Taken together, this paper suggests that effective ESG disclosure can have a positive impact on REIT debt financing and firm value due to the increased corporate transparency, and the ESG reporting framework developed by GRESB appears to be effective to provide transparency and comparability across the global real estate industry.
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spelling pubmed-83900442021-08-27 ESG Disclosure, REIT Debt Financing and Firm Value Feng, Zifeng Wu, Zhonghua J Real Estate Finan Econ Article Using recently available GRESB ESG public disclosure data for REITs around the world, we examine how ESG disclosure is related to REIT debt financing and firm value. We find that REITs with higher levels of ESG disclosure have lower cost of debt, higher credit ratings, and higher unsecured debt to total debt ratio, controlling for key firm characteristics. These findings suggest that improving ESG disclosure can help REITs to gain better access to the capital markets and enhance corporate financial flexibility, as lenders have paid close attention to a firm’s ESG disclosure and integrated evaluation of ESG factors into their lending decisions. Moreover, firm value of REITs is positively associated with their ESG disclosure level. When using the Covid-19 pandemic as a quasi-experimental setting, we find evidence that REITs with higher ESG disclosure levels before the pandemic exhibit higher firm value during the pandemic. These results indicate that investors do value active ESG disclosure by REITs. Additional analyses show that ESG disclosure level is sensitive to institutional ownership, implying that institutional investors may drive REIT ESG disclosure efforts. Taken together, this paper suggests that effective ESG disclosure can have a positive impact on REIT debt financing and firm value due to the increased corporate transparency, and the ESG reporting framework developed by GRESB appears to be effective to provide transparency and comparability across the global real estate industry. Springer US 2021-08-26 /pmc/articles/PMC8390044/ http://dx.doi.org/10.1007/s11146-021-09857-x Text en © The Author(s), under exclusive licence to Springer Science+Business Media, LLC, part of Springer Nature 2021 This article is made available via the PMC Open Access Subset for unrestricted research re-use and secondary analysis in any form or by any means with acknowledgement of the original source. These permissions are granted for the duration of the World Health Organization (WHO) declaration of COVID-19 as a global pandemic.
spellingShingle Article
Feng, Zifeng
Wu, Zhonghua
ESG Disclosure, REIT Debt Financing and Firm Value
title ESG Disclosure, REIT Debt Financing and Firm Value
title_full ESG Disclosure, REIT Debt Financing and Firm Value
title_fullStr ESG Disclosure, REIT Debt Financing and Firm Value
title_full_unstemmed ESG Disclosure, REIT Debt Financing and Firm Value
title_short ESG Disclosure, REIT Debt Financing and Firm Value
title_sort esg disclosure, reit debt financing and firm value
topic Article
url https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8390044/
http://dx.doi.org/10.1007/s11146-021-09857-x
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