Track: Undergraduate Student Paper Competition

Abstract

This research aims to evaluate the relationship between Environment, Social and Governance (ESG) rating and firm credit rating. The study focuses on listed companies in Indonesia and tries to examine the relationship using ordered probit regression model to reach the conclusion of this study. The findings show from three pillars of ESG, only environment and governance significantly affect firm credit rating. Specifically, firm credit ratings are negatively associated with environment pillar and positively related with governance pillar. This research also documents that individual categories of each ESG pillar possess different significance and effect.  This research results show that resource use, emission, human rights, management, and shareholders significantly affect firm credit rating. However, only emission and management possess positive effect. The overall research shows ESG rating as a non-financial information plays a huge role in creditworthiness assessment.