Which ESG dimensions matter in the hotel industry? Evidence from the cost of debt

Authors

• Yueying He, Spears School of Business at Oklahoma State University
• Rui Qi, Kemmons Wilson School of Hospitality and Resort Management
• Kevin Kam Fung So, Purdue University
• Yangen Li, Henry B. Tippie College of Business

Abstract

ESG has become a critical focus in the global hospitality industry. This study addresses a research gap by examining ESG dimensions' financial effects. Employing a two-way fixed effect model with firm-level fundamental data and ESG data, we identify the effect of the ESG performance of hotel firms in the United States on their cost of debt. Our novel results show that in general the hotel firms with higher ESG scores are significantly associated with lower debt cost. Furthermore, the study has observed that the relationship between hotels’ ESG scores and their debt costs has become statistically significant since 2014, implying that ESG has been more valued by lenders in recent years. This study presents the first evidence of the cost advantage linked to the ESG performance of U.S. hotel firms in debt markets, providing further incentives beyond stock markets to adopt environmentally friendly and socially responsible practices.

Publication Title

International Journal of Hospitality Management

Recommended Citation

He, Y., Qi, R., So, K., & Li, Y. (2024). Which ESG dimensions matter in the hotel industry? Evidence from the cost of debt. International Journal of Hospitality Management, 122 https://doi.org/10.1016/j.ijhm.2024.103866