Lending Relationships of Firms for a Just Transition

Mohammed Saharti, Asif Saeed, Sajid M. Chaudhry, Muhammad Ali Nasir

Research output: Contribution to journalArticlepeer-review

Abstract

This paper examines lending dynamics for firms aiming for a “just transition”. Analyzing 37,426 firm‐year observations from DealScan and Refinitiv's environmental, social and governance (ESG) transition data (2002–2021), we find that lenders offer lower interest rates to firms with prior relationships and strong ESG commitments, particularly environmental ones. While environmental factors receive favourable treatment, economic and governance transitions are less prioritized. Lenders tend to form more dispersed syndicates when supporting firms focused on ESG transitions, especially environmental ones. This research highlights the uneven focus within ESG transitions and emphasizes the underexamined area of governance, providing insights into lending relationships.
Original languageEnglish
JournalEuropean Financial Management
Early online date12 Dec 2024
DOIs
Publication statusE-pub ahead of print - 12 Dec 2024

Bibliographical note

Copyright © 2024 John Wiley & Sons Ltd. This is the peer reviewed version of the following article: 'Saharti, M., Saeed, A., Chaudhry, S.M. and Nasir, M.A. (2024), Lending Relationships of Firms for a Just Transition. European Financial Management', which has been published in final form at https://doi.org/10.1111/eufm.12535. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archived Versions.

Keywords

  • ESG
  • financing arrangement
  • interest rate
  • just transition
  • sustainability

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