The Impact of ESG Ratings on Corporate Debt Availability: Evidence from Malaysian Public Listed Companies

Eugene Leong U Zii

doi:10.54097/31rg9v88

Authors

Eugene Leong U Zii Sunway Business School, Sunway University, Selangor, Malaysia

DOI:

https://doi.org/10.54097/31rg9v88

Keywords:

Corporate debt availability, debt financing, creditors.

Abstract

When making lending decisions, creditors are paying more attention to companies’ Environmental, Social, and Governance performance in recent years as global ESG awareness has grown more widespread. Although many studies show that ESG ratings has a positive impact on corporate debt accessibility, there is little to no related studies of this phenomenon in the Malaysian context. Thus, the purpose of this paper is to investigate how ESG ratings affect Malaysian public listed companies’ corporate debt accessibility. This paper uses data from Malaysian public listed companies ranging from 2021-2023 extracted from the Refinitiv Eikon database, and regression analysis is performed to evaluate how corporate debt accessibility is affected by ESG ratings. The research findings reveal that corporate debt accessibility is enhanced by ESG ratings. From the perspective of the three ESG pillars, although social responsibility increases corporate debt accessibility, environmental and corporate governance have no impact on corporate debt accessibility. This means that ESG investments improve a firm reputation, enabling better access to financing conditions and scale.

Downloads

Download data is not yet available.

References

[1] Ni J, Kong L W. Environmental information disclosure, bank credit decisions and debt financing cost: evidence from the listed company in heavy polluting industries of A-shares in Shanghai stock market and Shenzhen stock market. Economic Review, 2016, 50 (01): 147-156.

[2] Zhao Y, Gao Y, Hong D. Sustainable innovation and economic resilience: deciphering ESG ratings' role in lowering debt financing costs. Journal of the Knowledge Economy, 2024, 16 (1): 4309-4343.

[3] Wu L, Li Y Y, Yang L. Does ESG information disclosure affect corporate credit availability? Journal of Finance and Economics, 2023, 12 (04): 19-30.

[4] Li J L, Yang Z, Chen J, et al. Study on the mechanism of ESG promoting corporate performance: based on the perspective of corporate innovation. Science Of Science and Management of S. & T, 2021, 42 (09): 71-89.

[5] Zhang J X, Feng Y J, Zhang Z L. Effect test of ESG on real earnings management of enterprises. Statistics And Decision, 2025, 41 (10): 166-172.

[6] Qiang G L, Feng X, Jia P P. ESG rating discrepancy and corporate credit availability. Finance And Economics, 2024, 10 (11): 49-59.

[7] Gracia O, Siregar S V. Sustainability practices and the cost of debt: evidence from ASEAN countries. Journal Of Cleaner Production, 2021, 30 (10): 126942.

[8] Adeneye Y B, Kammoun I, Ab Wahab S N A. Capital structure and speed of adjustment: the impact of environmental, social and governance (ESG) performance. Sustainability Accounting, Management and Policy Journal, 2023, 14 (5): 945-977.

[9] Yu Z, Tong M H, Zhao J S. Pollutant discharge permit supervision, green financial innovation and corporate credit financing. Global Economics, 2025, 48 (05): 89-127.

[10] Bhatt P R, Bhatt R R. Corporate governance and firm performance in Malaysia. Corporate Governance: The International Journal of Business in Society, 2017, 17 (5): 896-912.

[11] Eliwa Y, Aboud A, Saleh A. ESG practices and the cost of debt: evidence from EU countries. Critical Perspectives on Accounting, 2021, 79 (5): 10-20.