ESG and the Cost of Debt: Role of Media Coverage

This study delves into the interplay between the Environmental, Social, and Governance (ESG) ratings and the debt costs incurred by Korean-listed companies, highlighting their pivotal significance in today’s corporate ecosystem. Our primary focus is to explore how the extent of media coverage moderates this relationship, thereby shedding light on the pivotal role that public scrutiny plays in shaping a company’s financial outcomes. Utilizing the Ordinary Least Squares (OLS) regression model, we rigorously control for industry and year effects, as well as firm-specific variations. Additionally, we conduct a series of supplementary analyses and robust tests to further strengthen the credibility of our findings. Our empirical analysis reveals that firms with poor ESG ratings, indicating corporate social irresponsibility, incur higher debt costs in the subsequent period. Notably, this adverse financial impact is significantly alleviated for companies that enjoy higher media coverage. This notable discovery underscores the potential of media scrutiny to reduce the financial burden imposed by inadequate ESG performance. Our results suggest that companies, especially those with limited media attention, should prioritize enhancing their ESG performance to mitigate potential financial implications. Overall, our research contributes to a more nuanced understanding of the intersection between corporate social responsibility, media coverage, and financial performance.