2025/10/11 by Qionghua Chu, Chu, Qionghua
Business, Management and Accounting · Economics, Econometrics and Finance · #Corporate Social Responsibility Reporting #FOS: Economics and business #FinTech, Crowdfunding, Digital Finance #General Finance (q-fin.GN) #Portfolio Management (q-fin.PM) #Sustainable Finance and Green Bonds
paper · pdf · doi:10.48550/arxiv.2510.15956
openalex publication_date 2025/10/11 · openalex created_date 2025/10/22 · openalex updated_date 2026/07/28
I identify a new signaling channel in ESG research by empirically examining whether environmental, social, and governance (ESG) investing remains valuable as large institutional investors increasingly shift toward artificial intelligence (AI). Using winsorized ESG scores of S&P 500 firms from Yahoo Finance and controlling for market value of equity, I conduct cross-sectional regressions to test the signaling mechanism. I demonstrate that Environmental, Social, Governance, and composite ESG scores strongly and positively signal higher debt-to-total-capital ratio, both individually and in various combinations. My findings contribute to the growing literature on ESG investing, offering economically meaningful signaling channel with implications for long-term portfolio management amid the rise of AI.