It is Not Only What You Say, But How You Say It : ESG, Corporate News, and the Impact on CDS Spreads

We analyze a unique source of media data to assess the influence of different topics of corporate news on costs of financing for a sample of large European and US firms from 2006 to 2016. We distinguish between volume (number of news), tonality (positive, neutral, negative), source (financial and mass media) and focus on ESG and report the following results: (1) the volume of ESG related news is significantly associated with CDS spreads and therefore matters for companies' refinancing costs; (2) news with positive (negative) tonality is associated with lower (higher) CDS spreads in the order of 5% (8%); (3) the tonality of ESG related news is even more pronounced leading to higher differences in CDS spreads. These results are robust in different subsamples, alternate specifications, and also in sensitivity tests to omitted variables. Overall, these results confirm the saying that it is not only what (ESG or Non-ESG) you (the media) say, but how (tonality) you say it