Using a comprehensive set of firms from 57 countries over the 2000–2016 period, we examine the relation between institutional investor horizons and firm-level credit ratings. Controlling for firm- and country-specific factors, as well as for firm fixed effects, we find that larger long-term (short-term) institutional ownership is associated with higher (lower) credit ratings. This finding is robust to sample composition, alternative estimation methods, and endogeneity concerns. Long-term institutional ownership affects ratings more during times of higher expropriation risk, for firms with weaker internal governance, and for those in countries with lower-quality institutional environments. Additional analysis shows that long-term investors can facilitate access to debt markets for firms facing severe agency problems. These findings suggest that, unlike their short-term counterparts, long-term investors can improve a firm’s credit risk profile through effective monitoring.
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Using a large set of firms from 35 countries over the 2010–2017 period, we find that the presence of a sustainability committee is positively associated with higher-quality environmental disclosure. This finding is robust to endogeneity and sample selection bias concerns. The sustainability committee effect is more pronounced when external environmental institutions are too weak to properly monitor corporate environmental disclosure. We also find that raising the quality of environmental disclosure leads to a lower cost of equity capital only for firms with sustainability committees in place. Our findings suggest that sustainability committees play an important role in facilitating and certifying corporate environmental disclosure.