Effects of firm-level ESG performance on creditworthiness in Japanese listed companies

Hiroaki Kambe, Masatoshi Tamamura

Research output: Contribution to journalArticlepeer-review

2 Citations (Scopus)


Against a backdrop of international public policies on sustainability such as SDGs, sustainable investment assets in the world stood at $30.7 trillion in 2018. In conjunction with the developing market of sustainable investment, academic research has proved that ESG performances positively affect financial performances in many cases. However, most of the previous studies have not analysed linkages between ESG performances and debt financing, nor have they targeted Asian markets. Thus, the purpose of this study is to analyse the effects of ESG performances on creditworthiness in Japanese companies. This empirical analysis used the ordered logit model where the dependent variable is S&P Credit Ratings, and the independent variables are ESG evaluations by Arabesque S-Ray. We used data for CY2019, and our final sample included 15 independent variables for 63 observations: 945 items were under the analysis. In result, we found that ESG total performance and governance performance positively affect a company’s creditworthiness, whilst there were no significant results concerning social and environmental performance. Therefore, business companies should consider improving governance performance for better credit ratings and financial institutions should consider governance performance in credit analysis. We also found that the effects of ESG total performance may change depending on whether ESG evaluations are based on financially material ESG issues, and that the effects of ESG total performance and pillar performances (environment, social, and governance, respectively) may differ. ESG evaluation agencies are recommended to disclose pillar performance evaluations with details of methodology for investors to consider ESG evaluations in investment decisions.

Original languageEnglish
JournalInternational Journal of Economic Policy Studies
Publication statusPublished - 2022 Aug


  • Credit ratings
  • ESG evaluation
  • Ordered logit model
  • Sustainable investment

ASJC Scopus subject areas

  • Economics and Econometrics
  • Political Science and International Relations
  • Sociology and Political Science


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