We are grateful to the Editor, Robert Van Ness, and to two anonymous referees for useful comments that considerably improved the paper. We also thank Davide Avino for helping us with the overview of the literature of corporate bond spread determinants.
The Effects of Corporate Social Performance on the Cost of Corporate Debt and Credit Ratings
Version of Record online: 17 JAN 2014
© 2014 The Eastern Finance Association
Volume 49, Issue 1, pages 49–75, February 2014
How to Cite
Oikonomou, I., Brooks, C. and Pavelin, S. (2014), The Effects of Corporate Social Performance on the Cost of Corporate Debt and Credit Ratings. Financial Review, 49: 49–75. doi: 10.1111/fire.12025
- Issue online: 17 JAN 2014
- Version of Record online: 17 JAN 2014
- corporate social responsibility;
- socially responsible investing;
- credit ratings;
- cost of debt;
- credit spreads;
- corporate bonds;
This study investigates the differential impact that various dimensions of corporate social performance have on the pricing of corporate debt as well as the assessment of the credit quality of specific bond issues. The empirical analysis, based on an extensive longitudinal data set, suggests that overall, good performance is rewarded and corporate social transgressions are penalized through lower and higher corporate bond yield spreads, respectively. Similar conclusions can be drawn when focusing on either the bond rating assigned to a specific debt issue or the probability of it being considered to be an asset of speculative grade.