Monetary Policy Stance and Corporate ESG Performance: Evidence from S&P 500 Firms, 2007–2020
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- This thesis examines whether a tightening of the monetary policy stance is associated with lower corporate ESG performance, whether any reduction falls evenly across the environmental, social and governance pillars, and whether board independence moderates the response. It uses an unbalanced panel of 1,667 firm-years covering 416 S&P 500 firms between 2007 and 2020, drawn from the ESG report corpus of Thewissen, Shrestha, Arslan-Ayaydin and Beibei (2026) and merged with accounting, market and rating data. The monetary policy stance is measured by the December to December change in the Wu-Xia shadow federal funds rate. A tightening of one percentage point is associated with a fall of 0.115 points in the MSCI weighted average key issue score, though the association does not survive substitution of the industry-adjusted score. The social and governance pillars decline while the environmental pillar does not, but the ordering reverses under a second rating provider. Board independence shows no moderating effect. Three of the four findings turn on how ESG performance is measured rather than on how firms behaved, which is the study's principal contribution and a caution for work drawing behavioural inferences from vendor ratings