Are ESG performance and leverage connected? Analysis of companies listed on the B3 stock exchange

Abstract Purpose: This research aimed to analyze how environmental, social, and governance (ESG) performance and ESG pillars affect companies’ book and market leverage, while also examining the state controller’s role in this context. Originality/value: No research was found on the relationship between leverage and ESG performance in Brazil. This study also analyzes how the identity of the state controller affects book and market leverage by employing quantile regression. This advanced method yields more robust results when dealing with potential sample outliers. Unlike previous studies, this study demonstrated distinctions in the choice of leverage type (book or market). It revealed that the relationship between ESG performance and leverage varies according to the leverage proxy used. Design/methodology/approach: The sample comprised 115 Brazilian non-financial companies from 2010 to 2023. The companies’ data were obtained from Thomson Reuters and Economatica databases and analyzed using quantile regression. Findings: The results indicate a positive relationship between the ESG score, ESG pillars, and book leverage, as well as between ESG pillars and market leverage. In turn, ESG performance is inversely related to market leverage. State control in the models varies regarding relationships with book and market leverage.