A risk management perspective on CSR and the marginal cost of debt: empirical evidence from Europe.

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Reference

Kordsachia, O. (2021). A risk management perspective on CSR and the marginal cost of debt: empirical evidence from Europe. Review of Managerial Science, 15(6), 1611-1643.

Publication type

Article in Scientific Journal

Abstract

This article investigates the association between CSR and marginal credit costs of European companies. We provide instance for a negative association based on a variety of model specifcations and fne-grained measures for CSR. These results can be explained in light of the increasing relevance of socially responsible investors for fnancing costs of companies. We further apply the risk management perspective on CSR to the credit market and show that the insurance-like property of CSR is especially relevant for companies in relative fnancial distress as measured by the interest coverage ratio. This study also examines the association between CSR assurance and credit costs and provides evidence that creditors reward non-fnancial insurance by reduced required rate of returns. Finally, we contribute to the corporate governance literature by modelling the association between diferent board characteristics and credit costs.

DOI

http://dx.doi.org/https://doi.org/10.1007/s11846-020-00392-2