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The Effects of Corporate Social Performance on the Cost of Corporate Debt and Credit Ratings
Author(s) -
Oikonomou Ioannis,
Brooks Chris,
Pavelin Stephen
Publication year - 2014
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/fire.12025
Subject(s) - corporate bond , corporate debt , bond , debt , credit rating , bond credit rating , yield (engineering) , business , differential (mechanical device) , asset (computer security) , quality (philosophy) , set (abstract data type) , economics , monetary economics , actuarial science , credit risk , finance , philosophy , materials science , computer security , epistemology , computer science , engineering , credit reference , metallurgy , aerospace engineering , programming language
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.