The Impact of Corporate Social Responsibility on the Cost of Bank Loans

Abstract

This study examines the link between corporate social responsibility and bank debt. Our focus on banks exploits their specialized role as quasi-insider delegated monitors. We find that firms with the worst social responsibility scores pay up to 20 basis points more than the most responsible firms. However, we find that for the majority of firms, the impact of CSR is not economically important. The modest premiums associated with CSR suggest that banks do not regard corporate social responsibility as significantly value enhancing or risk reducing.

Keywords: corporate social responsibility, socially responsible investing, banking, delegated monitoring, loan pricing, Granger causality, propensity score

JEL Classification: A13, G21, L21, M14