When Does ESG Lose Value Relevance? A Discount-Rate Threshold in Korea

Lee, Sunwoo (2026): When Does ESG Lose Value Relevance? A Discount-Rate Threshold in Korea.

Abstract

Whether ESG performance creates value for shareholders remains contested. We ask whether the ESG–firm value relation in Korea depends on the prevailing monetary regime. Hansen’s (1999) panel threshold model, applied to 5,110 firm-year observations of KOSPI-listed firms over 2012–2025 with cluster-robust inference and 1,000 bootstrap replications, locates a structural break at a 3-year AA− corporate bond yield of 3.19%. The threshold is sharply identified (F = 72.59, bootstrap p < 0.001) and falls between the Bank of Korea’s pre-tightening years and the 2022–2024 hiking cycle. The ESG slope is positive below the threshold (β = 0.0147) and negative above it (β = −0.0262), though neither clears the 10% level (p = 0.398; p = 0.151). We read the evidence as a regime shift in how the Korean market prices ESG, in line with the long-duration discount-rate channel in Pástor, Stambaugh and Taylor (2021). The within-regime imprecision matches the rating-noise mechanism in Avramov et al. (2022).

• Item Type: MPRA Paper
• Language: English
• Keywords: ESG, firm value, Tobin’s Q, panel threshold model, monetary regime, KOSPI
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C23 - Panel Data Models ; Spatio-temporal Models; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E43 - Interest Rates: Determination, Term Structure, and Effects; G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy ; Financial Risk and Risk Management ; Capital and Ownership Structure ; Value of Firms ; Goodwill; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M1 - Business Administration > M14 - Corporate Culture ; Diversity ; Social Responsibility

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