Does Corporate Social Responsibility (CSR) Improve Credit Ratings? Evidence from Geographic Identification
59 Pages Posted: 23 Oct 2013
Date Written: October 22, 2013
We show that a firm’s CSR policy is significantly influenced by the CSR policies of firms in the same 3-digit zip code, an effect possibly due to investor clienteles, local competition, and/or social interactions. We then exploit the variation in CSR across the zip codes to estimate the effect of CSR on credit ratings under the assumption that zip code assignments are exogenous. We find that more socially responsible firms enjoy more favorable credit ratings. In particular, an increase in CSR by one standard deviation improves the firm’s credit rating by as much as 4.5%.
Keywords: corporate social responsibility, geography, credit ratings, CSR, social responsibility, instrumental variable, endogeneity
JEL Classification: G32, G34
Suggested Citation: Suggested Citation