Over‐investment or risk mitigation? Corporate social responsibility in Asia‐Pacific, Europe, Japan, and the United States

Utz, Sebastian

doi:10.1016/j.rfe.2017.10.001

Cited by 70 publications

(88 citation statements)

References 122 publications

(213 reference statements)

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“…Majority of the studies found a positive relationship between CSP and financial performance (Atan, Alam, Said, & Zamri, 2018;Godfrey et al, 2009;Velte, 2017). However, CSP may influence the financial performance negatively due to stakeholders' negative perception over high emphasise on CSP (Utz, 2018)…”

Section: Social Performance and Financial Performancementioning

confidence: 99%

Do environmental, social and governance performance affect the financial performance of banks? A cross-country study of emerging market banks

Shakil

Mahmood

Tasnia

et al. 2019

MEQ

171

117

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Purpose Earlier firms were evaluated mostly from their financial performance perspective, but with the increasing attention to sustainability goals, environmental, social and governance (ESG) performance of firms became key concerns to stakeholders. The purpose of this paper is to explore the effects of ESG performance of banks on their financial performance, in the context of emerging markets. Design/methodology/approach This study employs the generalised method of moments technique for estimation purpose due to the dynamic nature of the data and to correct for endogeneity. This study uses the ESG performance data of 93 emerging market banks from 2015 to 2018, available in Asset4 ESG database of Refinitiv, formerly known as Thompson Reuters. The accounting and financial data are collected from Refinitiv Datastream database. Findings The findings indicate a positive association of emerging market banks’ environmental and social performance with their financial performance, but governance performance does not influence financial performance. Originality/value While many studies exist on the association of ESG concerns of an organisation with their financial profitability, the literature on in the context of banking is still limited. To the best of the authors’ knowledge, this is the first study that examines the effect of ESG practices of banks on their financial performance in the context of emerging economies.

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Section: Social Performance and Financial Performancementioning

confidence: 99%

Do environmental, social and governance performance affect the financial performance of banks? A cross-country study of emerging market banks

Shakil

Mahmood

Tasnia

et al. 2019

MEQ

171

117

View full text Add to dashboard Cite

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“…One possible reason for the lack of consistent statistically significant changes in donations in this study is cultural or institutional. Utz [96] explained that companies in the Asia-Pacific regions tend to overinvest in CSR, unlike companies in the US, Europe, and Japan. His finding is that the higher the CSR of Asian companies, the greater the risk of the stock price crash, possibly due to the lower corporate governance.…”

Section: Conclusion and Discussionmentioning

confidence: 99%

Do Managers Pay CSR for Private Motivation? A Dividend Tax Cut Case in Korea

2019

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A CEO who has an opportunity to pursue his interest may sacrifice investors with inefficient investments such as overinvestment in corporate social responsibility (CSR). As prior researchers have suggested a possibility to detect the perk portion of CSR investment using the dividend tax cut event, we tested whether managers decreased CSR spending while accelerating dividend payouts during the Korean dividend tax cut of 2015. Consistent with the prior studies on the dividend tax cut, we discovered a pattern of incremental dividend increase for the companies of agency conflict measured by extreme CEO ownership. However, we failed to find any statistically significant simultaneous reduction in donations after 2015. This study does not provide evidence that investments in CSR of Korean firms are not due to CEOs’ personal interest-seeking. Instead, we showed that the dividend tax cut event may not work as a universally applicable quasi-experimental setting to detect management overinvestments in CSR.

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“…We too hypothesize a nonlinear relationship between CSP and loan spreads, but we assume a different relationship from that of Bae et al [15]. Several studies find evidence that CSP has a mitigating effect on stock price crash risk [43] and on downside risk [44,45]. From a theoretical point of view, the previous literature argues that CSR investments can reduce a firm's risk exposure through insurance-like protection by generating moral capital among stakeholders.…”

Section: Do Csr Ratings Affect Loan Spreads?mentioning

confidence: 91%

“…In addition, we have already clarified (see Introduction) that the results provided by Bae et al [15] for the US market cannot be mechanically extended to other institutional contexts. In this respect, further confirmation comes from Utz [43], who examines the predictive power of CSP for both idiosyncratic risk and stock crash risk in an international sample and finds mixed results. In the Asia-Pacific sample, high CSP increases crash risk, in accordance with the overinvestment hypothesis.…”

Section: Do Csr Ratings Affect Loan Spreads?mentioning

confidence: 98%

Do CSR Ratings Affect Loan Spreads? Evidence from European Syndicated Loan Market

Drago

Carnevale

2020

Sustainability

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We investigate whether corporate social responsibility (CSR) ratings affect the syndicated loan spreads paid by European listed firms. By performing ordinary least squares (OLS) pooled regressions on a sample of 1101 syndicated loans granted to European companies, we find evidence that borrowers’ CSR ratings have a significant impact on loan spreads. However, the relationship between CSR ratings and loan spreads is quite complex. Low CSR-rated firms pay higher loan spreads than better CSR-rated firms, but high CSR ratings are not always rewarded by lenders. The benefits of a high CSR rating level are significant only for firms located in countries that pay great attention to sustainability issues. Overall, our work provides a key to reconciling the mixed results obtained in the empirical literature, as we find evidence of a significant lack of homogeneity within the European Union countries regarding the relationship between CSR performance and the cost of debt financing.

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Over‐investment or risk mitigation? Corporate social responsibility in Asia‐Pacific, Europe, Japan, and the United States

Cited by 70 publications

References 122 publications

Do environmental, social and governance performance affect the financial performance of banks? A cross-country study of emerging market banks

Do environmental, social and governance performance affect the financial performance of banks? A cross-country study of emerging market banks

Do Managers Pay CSR for Private Motivation? A Dividend Tax Cut Case in Korea

Do CSR Ratings Affect Loan Spreads? Evidence from European Syndicated Loan Market

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