Pornsit Jiraporn is an Associate Professor of Finance in the School of Graduate Professional Studies at Pennsylvania State University in Malvern, PA and a Visiting Associate Professor of Finance at The National Institute of Development Administration (NIDA) and SASIN Graduate Institute of Business Administration (GIBA), Chulalongkorn University in Bangkok, Thailand. Napatsorn Jiraporn is an Assistant Professor of Marketing at State University of New York (SUNY) at Oswego in Oswego, NY. Ardisak Boeprasert is a PhD candidate at the National Institute of Development Administration (NIDA), Bangkok, Thailand and The Petroleum Authority of Thailand in Bangkok, Thailand. Kiyoung Chang is an Associate Professor of Finance at the University of South Florida-Sarasota-Manatee in Sarasota, FL 34243.
Does Corporate Social Responsibility (CSR) Improve Credit Ratings? Evidence from Geographic Identification
Version of Record online: 24 SEP 2014
© 2014 Financial Management Association International.
Volume 43, Issue 3, pages 505–531, Fall 2014
How to Cite
Jiraporn, P., Jiraporn, N., Boeprasert, A. and Chang, K. (2014), Does Corporate Social Responsibility (CSR) Improve Credit Ratings? Evidence from Geographic Identification. Financial Management, 43: 505–531. doi: 10.1111/fima.12044
- Issue online: 24 SEP 2014
- Version of Record online: 24 SEP 2014
- Accepted manuscript online: 30 OCT 2013 02:15AM EST
We show that a firm's CSR policy is significantly influenced by the CSR policies of firms in the same three-digit zip code, an effect possibly due to investor clienteles, local competition, and/or social interactions. We then exploit the variation in CSR across the zip codes to estimate the effect of CSR on credit ratings under the assumption that zip code assignments are exogenous. We find that more socially responsible firms enjoy more favorable credit ratings. In particular, an increase in CSR by one standard deviation improves the firm's credit rating by as much as 4.5%.