The Impact of Corporate Social Performance on the Cost of Debt and Access to Debt Financing for Listed European Non-Financial Firms

European Management Journal, Forthcoming

39 Pages Posted: 28 Sep 2017 Last revised: 18 Oct 2017

See all articles by Fabio La Rosa

Fabio La Rosa

Kore University of Enna

Giovanni Liberatore

University of Florence - Department of Business Economics

Francesco Mazzi

University of Florence - Department of Business Economics

Simone Terzani

University of Perugia - Department of Economics

Date Written: September 27, 2017

Abstract

This study addresses the controversial issue of how non-financial performance affects the cost of debt capital and access to it. The relationship between corporate social performance and two measures of debt cost (accounting-based and market-based) and the measure of debt access are analysed by means of a multi-theoretical framework combining economics with social theories. By observing a sample of listed European non-financial firms over an 8-year period from 2005 to 2012, we find a negative relationship between corporate social performance and interest rate. Consistent with this result, we find a positive relationship between corporate social performance and debt rating. Thus, corporate social performance has a positive role in reducing the cost of debt capital. Moreover, firms with better corporate social performance are more attractive to lenders in terms of leverage allowance. Overall, our findings provide deeper insight into the reasons why companies should improve their corporate social performance.

Keywords: non-financial performance; corporate social responsibility; social performance; debt cost; debt financing access

Suggested Citation

La Rosa, Fabio and Liberatore, Giovanni and Mazzi, Francesco and Terzani, Simone, The Impact of Corporate Social Performance on the Cost of Debt and Access to Debt Financing for Listed European Non-Financial Firms (September 27, 2017). European Management Journal, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3043624

Fabio La Rosa

Kore University of Enna

Cittadella Universitaria
Enna, Enna 94100
Italy

Giovanni Liberatore (Contact Author)

University of Florence - Department of Business Economics ( email )

Via delle Pandette 9
Florence, Florence 50132
Italy
0039 055 4374684 (Phone)
0039 055 4374910 (Fax)

Francesco Mazzi

University of Florence - Department of Business Economics ( email )

Via delle Pandette 9
Florence, Florence 50132
Italy
0039 055 4374684 (Phone)
0039 055 4374910 (Fax)

Simone Terzani

University of Perugia - Department of Economics

via Pascoli, 20
PG 06123 Perugia, 06123
Italy

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