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

27 Pages Posted: 18 Jan 2014

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: February 2014

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 data set, suggests that overall, good performance is rewarded and corporate social transgressions are penalized 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.

Keywords: corporate social responsibility, CSP, socially responsible investing, 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 (February 2014). Financial Review, Vol. 49, Issue 1, pp. 49-75, 2014. Available at SSRN: https://ssrn.com/abstract=2381001 or http://dx.doi.org/10.1111/fire.12025

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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