The Relationship Between Credit Rating and Corporate Social Responsibility

Wang, Danlin

doi:10.2139/ssrn.3583934

Cited by 1 publication

(4 citation statements)

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“…Therefore, an elevation in a company’s social responsibility score enhances its solvency capacity and diminishes the likelihood of default. These results align with the empirical findings of Attig et al (2013), Wang (2020) and Bannier et al (2022).…”

Section: Resultssupporting

confidence: 90%

“…For these reasons, several studies, such as Attig et al (2013), Jiraporn et al (2014), Bae et al (2018), Wang (2020) and Bannier et al (2022), focus on the credit rating indicator. For example, Attig et al (2013) reveal that CSR strength and concerns significantly influence credit ratings, with individual CSR components related to stakeholder management being vital in explaining corporate creditworthiness.…”

Section: Theoretical Frameworkmentioning

confidence: 99%

“…Credit rating Wang (2020) suggests that firms committed to CSR and obtaining high CSR scores are more likely to achieve favorable credit ratings. The study by Ftiti et al (2022) examines the impact of CSR on the UK bond market.…”

Section: Theoretical Frameworkmentioning

confidence: 99%

“…The increased engagement in CSR practices has prompted some researchers to question whether CSR influences business performance (Ben Saad and Belkacem, 2022), debt maturity (Nguyen et al , 2020), market liquidity (Roy et al , 2020), mergers and acquisitions (Deng et al , 2013), cash flow decisions (Hyung Oh et al , 2021) and dividend policy (Cheung et al , 2018). However, the few studies exploring the CSR/credit rating link show that the relationship is rather ambiguous (Attig et al , 2013; Jiraporn et al , 2014; Bae et al , 2018; Wang, 2020; Bannier et al , 2022; Chang et al , 2022).…”

Section: Introductionmentioning

confidence: 99%

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Corporate social responsibility and credit rating: evidence from French companies

Ben Saad,

Laouiti,

Ajina

2024

RAF

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Purpose This study aims to provide further insights into the connection between corporate social responsibility (CSR) and companies’ credit ratings, while also exploring the role of corporate governance as a moderating factor. The hypotheses for this relationship are rooted in both legitimacy and stakeholder theories. Design/methodology/approach Using a sample of French non-financial listed firms from 2007 to 2020, this paper uses the ordered probit model introduced by Greene (2000). The issue of endogeneity has also been addressed. Findings The study reveals that CSR practices positively impact companies’ credit ratings by enhancing solvency and financial performance. Specifically, firms that prioritize CSR, particularly in the social and environmental dimensions (such as community relations, diversity, employee relations, environmental performance and product characteristics), tend to have higher credit ratings and a reduced risk of default. This suggests that credit rating agencies likely incorporate CSR performance when assigning credit ratings. Furthermore, the quality of corporate governance acts as a moderator, strengthening the relationship between CSR and credit ratings. The findings remain robust even after accounting for key firm attributes and addressing potential endogeneity between CSR and credit ratings. Practical implications This research provides valuable guidance for policymakers, corporate managers, investors and other stakeholders, as it offers insights into the influence of CSR activities on risk premiums and financing costs. For financial institutions, expanding credit decisions to encompass non-financial factors such as CSR can result in more accurate predictions of firm credit quality compared to relying solely on financial indicators. Originality/value To the best of the authors’ knowledge, this study stands out as the first to systematically examine the relationship between CSR and credit ratings within the French context. Moreover, it distinguishes itself by investigating the moderating influence of corporate governance on this relationship, setting it apart from prior research.

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Section: Resultssupporting

confidence: 90%