It is not only what you say,but how you say it: ESG,corporate news,and the impact on CDS spreads

We assess the influence of corporate news on costs of financing for a sample of large European and U.S. firms from 2006 to 2016. Focusing on environmental, social, and governance (ESG) news items, we take into account volume (number of news items), tonality (positive, neutral, negative), and source (financial or mass media). We find that (1) the volume of ESG-related news is significantly associated with credit default swap (CDS) spreads and therefore matters for companies' refinancing costs; (2) news with positive (negative) tonality is associated with lower (higher) CDS spreads by about 4% (6%); (3) tonality matters even more for ESG-related news. These results hold for different subsamples and alternate specifications, and are relatively insensitive to omitted variables.