The Effects of Corporate and Country Sustainability Characteristics on the Cost of Debt: An International Investigation

Hoepner, Andreas G. F.; Oikonomou, Ioannis; Scholtens, Bert; Schröder, Michael

doi:10.2139/ssrn.2532431

Cited by 37 publications

(84 citation statements)

References 49 publications

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“…Our findings provide a new lens for obtaining a more profound insight into the divergence in existing findings (see for comparison Brammer, Brooks, & Pavelin, 2006;Mishra & Suar, 2010;Fujii, Iwata, Kaneko, & Managi, 2013;Flammer, 2015;Hoepner et al, 2016). Our starting model (1), reported in Table 5, replicates previous analyses (e.g.…”

Section: Discussion Of the Resultssupporting

confidence: 80%

Does it pay to be sustainable? Looking inside the black box of the relationship between sustainability performance and financial performance

Hussain

Rigoni

Cavezzali

2018

Corp Soc Responsibility Env

181

128

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The last three decades have witnessed a huge amount of research exploring the linkage between companies' sustainability performance (SP), sustainability disclosure and financial performance (FP). Researchers have applied various methods and techniques to investigate this relationship, yet the results remain equivocal. In this article, we look inside this black box by considering various manifestations of sustainability practices and investigating their link with FP. We apply a manual content analysis technique to analyse the sustainability reports of the 100 best‐performing US firms. Our results reveal that fragmentation in the results is caused by the SP measurement. Additionally, we note that the interlinkages between different SP dimensions and sub‐dimensions are weak and somewhat contradictory. The results help draw important policy implications for the development of an SP reporting framework.

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Section: Discussion Of the Resultssupporting

confidence: 80%

Does it pay to be sustainable? Looking inside the black box of the relationship between sustainability performance and financial performance

Hussain

Rigoni

Cavezzali

2018

Corp Soc Responsibility Env

181

128

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“…Two opposing views have been proposed in the literature to explain the link between CSR and the cost of equity (Dhaliwal, Li, Tsang, & Yang, ; El Ghoul et al, ; El Ghoul et al, ; Humphrey, Lee, & Shen, ; Plumlee et al, ) and the cost of debt (Goss & Roberts, ; Hoepner et al, ; Magnanelli & Izzo, ; Oikonomou et al, ). A first perspective draws from the resource‐based view of CSR (Hillman & Keim, ; Surroca, Tribó, & Waddock, ; Wang & Bansal, ) and suggests that a firm's survival depends on the resources in its environment and, as a result, firms need to manage the risk associated with its stakeholders who can significantly influence the supply of critical resources.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Our study contributes to the literature in three main ways. First, we contribute to the literature on the link between CSR and the cost of financing (both equity and debt; e.g., Chava, ; El Ghoul et al, ; El Ghoul et al, ; Goss & Roberts, ; Gregory et al, ; Hoepner et al, ; Plumlee et al, ) by showing that this relationship depends on the country corporate governance systems. Our results suggest that the country corporate governance system is an important omitted variable in prior studies that examine the effect of CSR on the cost of financing using an international sample (El Ghoul et al, ) and highlight the limited external validity of studies focusing on a single setting (e.g., El Ghoul et al, ; Goss & Roberts, ; Oikonomou, Brooks, & Pavelin, ; Plumlee et al, ).…”

Section: Introductionmentioning

confidence: 99%

“…Although prior research on the link between the firm's engagement in CSR and the cost of equity and debt (e.g., Chava, ; El Ghoul, Guedhami, Kim, & Park, ; El Ghoul, Guedhami, Kwok, & Mishra, ; Goss & Roberts, ; Gregory, Whittaker, & Yan, ; Hoepner, Oikonomou, Scholtens, & Schröder, ; Plumlee, Brown, Hayesa, & Marshall, ) reports conflicting results, little attention has been paid to how CSR performance interacts with the national corporate governance system to influence the cost of equity and debt. This neglect is noteworthy because, as argued by several comparative scholars, one cannot understand the CSR strategy and policies of organizations without understanding the nature of the institutional environments in which they operate (Aguilera, Filatotchev, Gospel, & Jackson, ; Devinney et al, ).…”

Section: Introductionmentioning

confidence: 99%

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Corporate social responsibility and cost of financing—The importance of the international corporate governance system

Desender

LópezPuertas‐Lamy

Pattitoni

et al. 2020

Corporate Governance

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Research Question/Issue: Our study examines whether international corporate governance systems shape the relationship between a firm's engagement in corporate social responsibility (CSR) and their cost of financing (both equity and debt).Research Findings/Insights: Using a large international sample, our findings reveal that although the link between CSR performance and the cost of equity is negative in a shareholder-oriented system, this relationship is positive in a stakeholder-oriented system. Furthermore, the link between CSR performance and the cost of debt is negative for firms that are close to default in both systems.Theoretical/Academic Implications: Our study highlights the importance of considering the shareholder/stakeholder orientation at the country level to explain the link between CSR performance and the cost of financing. Our findings help to explain and place into context the previous mixed findings on the relationship between CSR and the cost of equity and debt and add to the debate about whether CSR is beneficial or detrimental to corporate governance.Practitioner/Policy Implications: The analysis of how the country corporate governance system influences the effect of CSR performance on the cost of financing allows for a deeper understanding of how investors respond to CSR initiatives worldwide and offers managers, directors, and policy makers context-specific recommendations. Our analysis also highlights the limitations of transferring insights regarding CSR from one corporate governance system to another. K E Y W O R D Scorporate governance, corporate social responsibility, cost of debt, cost of equity

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“…El Ghoul et al (2015) show that the institutional framework of a country moderates the relation between CSR and firm value. 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.…”

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

140

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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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The Effects of Corporate and Country Sustainability Characteristics on the Cost of Debt: An International Investigation

Cited by 37 publications

References 49 publications

Does it pay to be sustainable? Looking inside the black box of the relationship between sustainability performance and financial performance

Does it pay to be sustainable? Looking inside the black box of the relationship between sustainability performance and financial performance

Corporate social responsibility and cost of financing—The importance of the international corporate governance system

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

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