Corporate social responsibility, investor protection, and cost of equity: A cross-country comparison

Breuer, Wolfgang; Müller, Torbjörn; Rosenbach, David Johannes; Salzmann, Astrid Juliane

doi:10.1016/j.jbankfin.2018.07.018

Cited by 190 publications

(158 citation statements)

References 64 publications

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“…The regression models have R 2 equal to 0.37, indicating that our models explain 37% of the variance in the COE. This result is consistent with the previous literature (e.g., Breuer, Müller, Rosenbach, & Salzmann, ; Cao et al, ; El Ghoul et al, ), although smaller R 2 is not uncommon in the field of social sciences (Wooldridge, ). Overall, the results indicate that iCarbon helps to reduce equity financing.…”

Section: Results and Analysissupporting

confidence: 93%

The effect of carbon dissemination on cost of equity

2019

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This study examines whether firms can influence their cost of equity (COE) by broadly disseminating their carbon information over Twitter. We study firms' dissemination decisions of carbon information by developing a comprehensive measure of carbon information that a firm makes onTwitter, referred to as iCarbon. Using a sample of 1,737 firmyear observations for 584 nonfinancial firms with aTwitter account and listed on the U.S. NASDAQ stock exchange over the period 2009-2015, we find that iCarbon is significantly and negatively associated with COE. Our results are consistent after determining the effect of Bloomberg's environmental and environmental, social, and governance disclosure. The findings also hold when using alternative measures of COE and iCarbon.

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Section: Results and Analysissupporting

confidence: 93%

The effect of carbon dissemination on cost of equity

2019

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“…As McWilliams et al [38] note that the CSR in different countries will show different characteristics as a result of the different development stage and legal requirements, and then affect the firm value and financial performance differently. For example, Breuer et al [39] find that for firms investing in CSR, the cost of equity falls (rises) in countries where investor protection is strong (poor). Auer and Schuhmacher [40] find that performance of the portfolios with high or low ESG has no significant difference with that of the benchmarks in the Asia-Pacific region and in the United States.…”

Section: Literature Review and Hypothesesmentioning

confidence: 99%

Does CSR Signal the Firm Value? Evidence from China

Bing

2019

Sustainability

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Compared to the rapid development of Corporate Social Responsibility (CSR) practices in developing countries, especially in China, the research about the effect of CSR on firm value has evolved more slowly. This paper examines the relationship between CSR and firm value used by listed Chinese companies from 2010 to 2017. The results for the whole sample show CSR significantly reduces firm value. Additionally, there are no significant differences for the effect of CSR on firm value between state owned enterprises (SOEs) and non-SOEs or sensitive industry and non-sensitive industry. To explore whether the relationship changes over time, we divided the period into two sub-periods. During 2010–2014, the results are similar with those obtained by the whole sample. However, the results significantly change during 2015–2017. Specifically, the negative and significant relationship between CSR and firm value becomes non-significant in the second sub-period. Compared to the weakening effect of CSR for non-SOEs on firm value, CSR for SOEs alleviates the effect, and CSR of SOEs increases firm value significantly. Similar results are obtained for non-sensitive industry and sensitive industry. The changes are the result of increasing awareness by government, companies, and investors on sustainable development after 2015. This finding enriches the research on the dynamic effect of CSR on firm value in developing countries.

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“…Hoepner, Oikonomou, Scholtens, and Schröder (2016), looking into 470 loan agreements in 28 different countries, find that higher country sustainability is associated with lower costs of bank loans. And finally, Breuer, Rosenbach, and Salzmann (2016) examine the effects of CSR on the cost of equity under different levels of investor protection. The authors conclude that, in countries where investor protection is strong, the cost of equity capital is negatively associated with the level of CSR investment.…”

Section: Csr and Firms' Institutional Context In The Literaturementioning

confidence: 99%

Corporate social responsibility and firm financial risk reduction: On the moderating role of the legal environment

Benlemlih¹,

Girerd‐Potin

2017

Business Fin & Account

139

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Approaching the institutional environment through its regulative component, we distinguish between shareholder‐oriented and stakeholder‐oriented countries. Identifying first this classification with the distinction between common law versus civil law countries and using a large sample of 5,716 firm‐year observations that represents 1,169 individual firms in 25 countries between 2001 and 2011, we show that Corporate Social Responsibility (CSR) significantly reduces firms’ idiosyncratic risk in civil law countries but not in common law countries. Using then a more direct classification based on shareholder and employee protection scores, our findings suggest that CSR negatively affects firms’ idiosyncratic and systematic risks only in less shareholder‐oriented and more stakeholder‐oriented countries, respectively. These findings are similar in the different components of CSR with two notable exceptions: a high score in corporate governance reduces firm risk only in common law countries, and community involvement increases idiosyncratic risk in more shareholder‐oriented and less stakeholder‐oriented countries, respectively. Taken together, our results strongly support the view that the relationship between CSR and financial risk is moderated by the institutional context of the firm.

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Corporate social responsibility, investor protection, and cost of equity: A cross-country comparison

Cited by 190 publications

References 64 publications

The effect of carbon dissemination on cost of equity

The effect of carbon dissemination on cost of equity

Does CSR Signal the Firm Value? Evidence from China

Corporate social responsibility and firm financial risk reduction: On the moderating role of the legal environment

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