The Effects of Corporate Social Performance on the Cost of Corporate Debt and Credit Ratings

38 Pages Posted: 14 Oct 2011

See all articles by Ioannis Oikonomou

Ioannis Oikonomou

University of Reading - ICMA Centre

Chris Brooks

University of Reading - ICMA Centre

Stephen Pavelin

University of Bath - School of Management; University of Reading - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: October 14, 2011

Abstract

This study investigates the differential impact that various dimensions of corporate social performance have on the pricing of corporate debt as well as the assessment of the credit quality of specific bond issues. The empirical analysis, based on an extensive longitudinal dataset, suggests that overall, good performance is rewarded and corporate social transgressions are penalised through lower and higher corporate bond yield spreads respectively. Similar conclusions can be drawn when focusing on either the bond rating assigned to a specific debt issue or the probability of it being considered to be an asset of speculative grade. Additional investigation shows that these relationships are more pronounced for bonds with higher maturities and those issues assigned with either high or very low ratings.

Keywords: Corporate Social Responsibility, CSR, CSP, Credit Ratings, Cost of Debt, Credit Spreads, Corporate Bonds

JEL Classification: C33, G32, M14

Suggested Citation

Oikonomou, Ioannis and Brooks, Chris and Pavelin, Stephen, The Effects of Corporate Social Performance on the Cost of Corporate Debt and Credit Ratings (October 14, 2011). Available at SSRN: https://ssrn.com/abstract=1944164 or http://dx.doi.org/10.2139/ssrn.1944164

Ioannis Oikonomou (Contact Author)

University of Reading - ICMA Centre ( email )

Whiteknights Park
P.O. Box 242
Reading RG6 6BA
United Kingdom

Chris Brooks

University of Reading - ICMA Centre ( email )

Whiteknights Park
P.O. Box 242
Reading RG6 6BA
United Kingdom
+44 118 931 82 39 (Phone)
+44 118 931 47 41 (Fax)

Stephen Pavelin

University of Bath - School of Management ( email )

Claverton Down
Bath, BA2 7AY
United Kingdom

University of Reading - Department of Economics ( email )

Reading, RG6 6AA
United Kingdom

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