KLD 400 Index Inclusion and Corporate Bonds

26 Pages Posted: 15 Aug 2012 Last revised: 21 Jan 2013

See all articles by Lindsay Baran

Lindsay Baran

Kent State University

Xinde Zhang

University of Arkansas - Department of Finance

Date Written: August 15, 2012


This study examines the relationship between the cost of public bonds and corporate social responsibility. We use firms added to the KLD 400 Index, a stock index of corporate social responsibility, and find that these firms have a significantly higher yield spread following inclusion to the index. This relationship remains constant even after controlling for the joint determination of yield spread, covenant structure, and debt maturity. We conclude that after firms are recognized as leaders in corporate social responsibility, they pay a higher yield to issue public debt.

Keywords: Corporate social responsibility, KLD 400 Index, Corporate bonds, Yield spread

Suggested Citation

Baran, Lindsay and Zhang, Xinde, KLD 400 Index Inclusion and Corporate Bonds (August 15, 2012). Midwest Finance Association 2013 Annual Meeting Paper, Available at SSRN: https://ssrn.com/abstract=2130037 or http://dx.doi.org/10.2139/ssrn.2130037

Lindsay Baran (Contact Author)

Kent State University ( email )

College of Business Administration
P.O. Box 5190
Kent, OH 44242-0001
United States

Xinde Zhang

University of Arkansas - Department of Finance ( email )

Fayetteville, AR 72701
United States

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