Sovereign credit ratings, firms’ environmental performance, and voice & accountability: A nexus
Abstract/Description
Governments and corporations can take advantage of an improvement in sovereign credit ratings by promoting environmentally friendly regulations and infrastructure development to pursue economic growth sustainably or follow a “race to the bottom” approach. However, following a sustainable economic development path depends on the voice (freedom of expression) and accountability (VA) norms of economic agents. Based upon these theoretical constructs, this study analyzes firms’ environmental performance in response to changes in sovereign credit ratings (SCRs) using a sample of firms from 88 countries. The empirical results suggest that an upgrade (downgrade) in a rating led to a lower (higher) environmental performance in the following year. Results also show that the VA positively moderates the negative association between SCRs and environmental performance. Furthermore, geographical heterogeneity exists in the SCRs-environmental performance as Middle Eastern and African (South Asia and the East-Asia-Pacific) firms are the least (most) responsive to SCRs. To combat climate change, the government and corporations must work together to realize sustainable development goals.
Keywords
Sovereign Credit Ratings, Environmental Performance, Voice & Accountability, Climate Change
Track
Finance
Session Number/Theme
2B
Session Chair
Dr. Ashraf Khan ; Dr. Mohsin Sadaqat
Start Date/Time
27-5-2023 11:30 AM
End Date/Time
27-5-2023 1:30 PM
Location
MCS-4, AMAN-CED, First Floor
Recommended Citation
Rizwan, M., Qureshi, A., & Sahibzada, I. (2023). Sovereign credit ratings, firms’ environmental performance, and voice & accountability: A nexus. 3rd IBA SBS International Conference 2024. Retrieved from https://ir.iba.edu.pk/sbsic/2023/program/26
COinS
Sovereign credit ratings, firms’ environmental performance, and voice & accountability: A nexus
MCS-4, AMAN-CED, First Floor
Governments and corporations can take advantage of an improvement in sovereign credit ratings by promoting environmentally friendly regulations and infrastructure development to pursue economic growth sustainably or follow a “race to the bottom” approach. However, following a sustainable economic development path depends on the voice (freedom of expression) and accountability (VA) norms of economic agents. Based upon these theoretical constructs, this study analyzes firms’ environmental performance in response to changes in sovereign credit ratings (SCRs) using a sample of firms from 88 countries. The empirical results suggest that an upgrade (downgrade) in a rating led to a lower (higher) environmental performance in the following year. Results also show that the VA positively moderates the negative association between SCRs and environmental performance. Furthermore, geographical heterogeneity exists in the SCRs-environmental performance as Middle Eastern and African (South Asia and the East-Asia-Pacific) firms are the least (most) responsive to SCRs. To combat climate change, the government and corporations must work together to realize sustainable development goals.
