Does corporate social responsibility reduce the costs of high leverage? Evidence from capital structure and product market interactions

Bae, Kee‐Hong; Ghoul, Sadok El; Guedhami, Omrane; Kwok, Chuck C.Y.; Zheng, Ying

doi:10.1016/j.jbankfin.2018.11.007

Cited by 138 publications

(112 citation statements)

References 43 publications

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“…Therefore, the cost of supporting community and social/environmental undertakings is usually factored into modeling corporate value [5]. Most studies hold that CSR creates value, and therefore weakens the negative correlation between managerial entrenchment and firm value and lowers firm risk [3,6,8,13], albeit the impact of CSR on corporate value may depend on economic conditions [30] and on whether high-CSR companies receive more favorable media coverage [31].…”

Section: Literature and Hypothesismentioning

confidence: 99%

“…Recently, the literature has paid increasing attention to the significance of corporate social responsibility (CSR) [1,2]. Most studies have focused on the effect of social responsibility on economic performance [3][4][5][6][7][8], corporate governance [9,10], financial cost [11][12][13], etc. However, studies have seldom examined the effect of CSR on merger and acquisition (M&A) contracting and the M&A success rate.…”

Section: Introductionmentioning

confidence: 99%

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The Value of CSR in Acquisitions: Evidence from China

Dbouk

et al. 2021

Sustainability

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In this paper, we aim to test whether and how corporate social responsibility (CSR) is valued in merger and acquisition (M&A) transactions. Employing multiple regression and logistic regression methods to examine the CSR in China’s domestic M&A market from 2007 to 2018, we reveal the following: (i) acquisition targets with higher social performance can attain higher acquisition valuation, especially when the acquirers are also socially responsible; (ii) high-CSR acquirers are inclined to choose equity payments, while high-CSR acquisition targets prefer to be paid in cash; (iii) high CSR performance boosts M&A success rate. The findings are robust, due to adopting two-stage least squares method to tackle endogeneity, substituting variable measures and data sources, and winsorizing variables at high levels to eliminate outliers. The value of CSR in M&As possibly results from the role of CSR in reducing information frictions, agency concerns, and corporate risks and is primarily associated with activities which are friendly to suppliers, customers, shareholders, public welfare, and natural environment, as well as being higher in developed regions and irrelevant to corporate ownership and nature. The study is of vital significance to the valuation and decision making in M&A deals.

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Section: Literature and Hypothesismentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

The Value of CSR in Acquisitions: Evidence from China

Dbouk

et al. 2021

Sustainability

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“…Haigh and Hazelton (2004) argue however that shareholder advocacy and managed investments in the context of socially responsible investment lack the power to create significant corporate change. More recent evidence suggests there is a direct link between CSR and firms' financing; Bae et al (2019) show that firms behaving in accordance with CSR reduces losses in market share when firms are highly leveraged. Goss and Roberts (2011) look at the link between CSR and bank debt, finding mixed evidence -lenders appear to be indifferent to CSR investments by highquality borrowers whereas low-quality borrowers face higher loan spreads and shorter maturities.…”

Section: Positive External Effectsmentioning

confidence: 99%

Should we worry about the decline of the public corporation? A brief survey of the economics and external effects of the stock market

Koptyug

Persson

Tåg

2020

The North American Journal of Economics and Finance

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. ABSTRACTIn recent years, the number of listed companies has been declining in many countries across the world. This paper provides a selective survey of the literature on the real economic effects of the stock market to assess the potential effects of this decline and determine whether it is likely to continue. The leading economic role of the stock market's primary market, in which firms raise capital by issuing new shares, is to help growing firms secure financing. We discuss providing and certifying information, coordinating investors, and easing the redeployment of capital as the means through which capital allocation can be achieved efficiently. The main economic role of the stock market's secondary market, the trade in existing shares, is to provide liquidity to shareholders, to aid in price discovery, and to provide diversification opportunities. Positive external effects from an active stock market may arise on consumers, labour and private firm due to increased corporate investment, more social responsible business strategies and a more positive business climate. Negative external effects on capital allocation and productivity can arise from short-termism, market mispricing, and increased cross-ownership. Local stock markets can spur innovation and foreign direct investment (FDI) and reduce the risk of early cross-border acquisitions. Given the myriad of useful economic functions the stock market performs, a future entirely absent of public companies is difficult to imagine and the decline is therefore likely at some point to come to an end. Whether we need to worry about the decline depends on the relative importance of the positive and negative external effects, a topic we feel warrants more research.

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“…Platonova et al (2018) [58] proved that there is a significant positive relationship between CSR disclosure and the financial performance. Bae et al(2019) [59] found that CSR reduces losses in market share when firms are highly leveraged. By reducing adverse behavior by customers and competitors, CSR helps highly leveraged firms keep customers and guard against rivals' predation.…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

Corporate Social Responsibility and Financial Performance: A Quantile Regression Approach

Liu

Guo

et al. 2019

Sustainability

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A prominent claim within the literature is that corporate social responsibility-disclosured firms are fundamentally more resilient to financial shocks, relative to firms that take no corporate social responsibility action. To test this, we examine the impact of corporate social responsibility (CSR) information disclosure on financial constraints (FC). Our sample is composed of A-share publicly listed firms from Shanghai and Shenzhen in China during 2013–2017. We find that CSR disclosure influences negatively financial constraints. The quantile regression results also indicate that the influences would more obvious when a company faces stronger financial constraints. Further, CSR disclosure influences negatively financial constraints in financially opaque firms, and the effect of financial opaque on the relationship strengthens when the company faces great financial constraints. After considering the problems of missing variables and endogenous, changing the level of CSR and FC measurement, using 2SLS and two-step GMM methods, the conclusion is still robust. However, the results should not be generalized, since the sample was based on 434 A-share publicly listed firms for 2013–2017. From the perspective of FC, this study contributes to the literature in the field of CSR and expands the empirical research on the economic consequences of CSR. It also can encourage enterprises to voluntarily disclose social responsibility information and it is of great significance to promote the stable development of the capital market and society.

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Does corporate social responsibility reduce the costs of high leverage? Evidence from capital structure and product market interactions

Cited by 138 publications

References 43 publications

The Value of CSR in Acquisitions: Evidence from China

The Value of CSR in Acquisitions: Evidence from China

Should we worry about the decline of the public corporation? A brief survey of the economics and external effects of the stock market

Corporate Social Responsibility and Financial Performance: A Quantile Regression Approach

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