Corporate Social Responsibility and Firms’ Cost of Equity: How Does Culture Matter?

Cross Cultural and Strategic Management 24, 105-124, 2017

38 Pages Posted: 1 May 2015 Last revised: 14 Dec 2017

See all articles by Marie-Louise Matthiesen

Marie-Louise Matthiesen

RWTH Aachen University - Department of Finance

Astrid Juliane Salzmann

Catholic University of Lille - IESEG School of Management; RWTH Aachen University - Department of Finance

Date Written: November 1, 2015

Abstract

The paper examines the relationship between CSR and cost of equity in an in-ternational context assessing the moderating effect of culture on the relation between CSR and the cost of equity. We use an international sample of 42 countries, and company-level data from 2002-2013, to address cross-country variations in the effects of CSR on cost of equity in different cultural contexts. We first substantiate previous research and show that the more a company is engaged in CSR, the lower its cost of equity. We then find that the relationship between CSR and cost of equity is stronger in countries with lower levels of assertiveness and higher levels of humane orientation and institutional collectivism. Our study advances understanding of how national culture promote socially and environmentally responsible behavior. The implementation of CSR strategies depends on cultural norms, so companies need to be sensitive to local demands and adjust their CSR approaches accordingly.

Keywords: corporate social responsibility, ESG, national culture, cost of capital

JEL Classification: A13, G23, G32, M14

Suggested Citation

Matthiesen, Marie-Louise and Salzmann, Astrid Juliane, Corporate Social Responsibility and Firms’ Cost of Equity: How Does Culture Matter? (November 1, 2015). Cross Cultural and Strategic Management 24, 105-124, 2017, Available at SSRN: https://ssrn.com/abstract=2600542 or http://dx.doi.org/10.2139/ssrn.2600542

Marie-Louise Matthiesen (Contact Author)

RWTH Aachen University - Department of Finance ( email )

Templergraben 64
Aachen, 52056
Germany

Astrid Juliane Salzmann

Catholic University of Lille - IESEG School of Management ( email )

Socle de la Grande Arche
1 Parvis de la Defense
Puteaux, Paris 92800
France

RWTH Aachen University - Department of Finance ( email )

Templergraben 64
Aachen, 52056
Germany

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