Published: 16 May 2023| Version 1 | DOI: 10.17632/zykf6zh5wg.1
Hugo Alvarez,


Given the singularities in the industry, Oil and Gas companies are under the spotlight of investors, governments, ecologists, and general population for the highly evident negative environmental effects of their daily processes and because of the energy transition. The findings in the literature about the impact of ESG disclosure on financial performance capital markets are inconclusive. Some authors report a positive, others a negative association, and there are even those who report a null association. The purpose of this study is to present a quantitative analysis of the association between: (1) ESG ratings and corporate bond credit spreads (debt market) and (2) ESG ratings and return of share prices (stock market), in the oil and gas industry. Two-stage-least-square regressions on panel data were executed (to overcome endogeneity) using secondary data from Refinitiv from 2018 to 2022. Our results indicate that there is a negative association between the EGS disclosure and the credit spread of corporate bonds; while in the stock market, a positive association was found between ESG disclosure and the stock return. Additionally, we conclude that compared with state-owned companies, the ESG disclosure of non-state-owned companies increases the financial performance by a greater extent in Oil and Gas industry. Hypothesis 1 (H1). A higher ESG rating is associated with a lower credit bond spread (risk) in O&G companies. Since the return of a security is inversely related to risk, we propose the second hypothesis to test: Hypothesis 2 (H2): A higher ESG rating is associated with a higher Year-to-Date total return of shares in O&G companies. In our study, state-owned companies refer to limited liability companies with more than 50% state-owned capital. Unlike non-state-owned companies, state-owned companies have the policy task of guiding national economic operations. The default risk of state-owned companies (SOC) is lower compared to that of non-state-owned companies (non-SOC) [17]. We anticipate that state-owned corporate bonds in the secondary market will have higher valuations and lower credit spreads. Non-state-owned companies rely more on information disclosure to convey positive signals to outsiders and enhance their competitiveness in the capital market. Therefore, ESG information plays a more significant role for them. This leads to the formulation of the third and fourth hypotheses: Hypothesis 3 (H3). Compared to state-owned companies, non-state-owned O&G companies' ESG disclosure reduces credit spreads of corporate bonds to a greater extent. Hypothesis 4 (H4): Compared to state-owned companies, non-state-owned O&G companies' ESG disclosure increases the Year-to-Date total return to a greater extent.



Escuela de Graduados en Administracion y Direccion de Empresas, Instituto Tecnologico y de Estudios Superiores de Monterrey


Energy Sustainability, Energy Economics, Oil Industry