Corporate Social Responsibility and Bond Volatility

56 Pages Posted: 11 Aug 2020 Last revised: 1 Apr 2023

See all articles by Trevor W. Chamberlain

Trevor W. Chamberlain

McMaster University - Finance & Business Economics

Zehua Zhang

Hunan University

Ran Zhao

Claremont Graduate University, Drucker School of Management

Lu Zhu

California State University, Long Beach - College of Business Administration

Date Written: June 12, 2020

Abstract

This paper examines the effects of corporate social performance on bond volatility. We find a strong positive relationship between social performance and volatility after controlling for bond characteristics and firm fundamentals. The empirical results show that the effect concentrates on social performance strengths and is robust to alternative measures, alternative sample periods and endogeneity controls. The main mechanism through which CSR spending affects bond market uncertainty is overinvestment inasmuch as social performance-related spending raises bond investor concerns. In addition, we find that the effect is more pronounced for firms with higher CEO risk-taking incentives and more active tax avoidance practices.

Keywords: Bond volatility, corporate social responsibility, overinvestment, CEO risk taking, tax avoidance

JEL Classification: G10, G12, G30, G32, M14

Suggested Citation

Chamberlain, Trevor W. and Zhang, Zehua and Zhao, Ran and Zhu, Lu, Corporate Social Responsibility and Bond Volatility (June 12, 2020). Available at SSRN: https://ssrn.com/abstract=3647460 or http://dx.doi.org/10.2139/ssrn.3647460

Trevor W. Chamberlain

McMaster University - Finance & Business Economics ( email )

School of Business
1280 Main St. W.
Hamilton, ON L8S 4M4
Canada

Zehua Zhang

Hunan University ( email )

Lushan Road, Yuelu District
Changsha, Hunan
China

Ran Zhao (Contact Author)

Claremont Graduate University, Drucker School of Management ( email )

150 E. Tenth Street
Claremont, CA 91711
United States

Lu Zhu

California State University, Long Beach - College of Business Administration ( email )

1250 Bellflower Blvd.
Long Beach, CA 90840
United States

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