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Corporate Social Responsibility and Access to Finance

Strategic Management Journal, 35 (1): 1-23.

43 Pages Posted: 25 May 2011 Last revised: 28 Nov 2014

Beiting Cheng

Harvard University - Harvard Business School

Ioannis Ioannou

London Business School

George Serafeim

Harvard University - Harvard Business School

Date Written: May 19, 2011

Abstract

In this paper, we investigate whether superior performance on corporate social responsibility (CSR) strategies leads to better access to finance. We hypothesize that better access to finance can be attributed to a) reduced agency costs due to enhanced stakeholder engagement and b) reduced informational asymmetry due to increased transparency. Using a large cross-section of firms, we find that firms with better CSR performance face significantly lower capital constraints. Moreover, we provide evidence that both of the hypothesized mechanisms, better stakeholder engagement and transparency around CSR performance, are important in reducing capital constraints. The results are further confirmed using several alternative measures of capital constraints, a paired analysis based on a ratings shock to CSR performance, an instrumental variables and also a simultaneous equations approach. Finally, we show that the relation is driven by both the social and the environmental dimension of CSR.

Keywords: corporate social responsibility, sustainability, capital constraints, ESG (environmental, social, governance) performance

JEL Classification: M00, M1, M14, M41, D82, D83, D84

Suggested Citation

Cheng, Beiting and Ioannou, Ioannis and Serafeim, George, Corporate Social Responsibility and Access to Finance (May 19, 2011). Strategic Management Journal, 35 (1): 1-23.. Available at SSRN: https://ssrn.com/abstract=1847085 or http://dx.doi.org/10.2139/ssrn.1847085

Beiting Cheng

Harvard University - Harvard Business School ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

Ioannis Ioannou

London Business School ( email )

Sussex Place
Regent's Park
London, NW1 4SA
United Kingdom
02070008748 (Phone)

HOME PAGE: http://www.ioannou.us

George Serafeim (Contact Author)

Harvard University - Harvard Business School ( email )

381 Morgan Hall
Boston, MA 02163
United States

HOME PAGE: http://drfd.hbs.edu/fit/public/facultyInfo.do?facInfo=ovr&facId=15705

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