Impact of CSR on cost of debt and cost of capital: Australian evidence

Purpose This paper aims to investigate the association between the corporate social responsibility (CSR) and the cost of equity (COE) and cost of debt (COD). Design/methodology/approach The authors use the multivariate regression analysis approach to address the developed hypotheses. Findings Using...

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Bibliographic Details
Published inSocial responsibility journal Vol. 16; no. 3; pp. 419 - 430
Main Authors Bhuiyan, Md. Borhan Uddin, Nguyen, Thi Hong Nhung
Format Journal Article
LanguageEnglish
Published Bingley Emerald Publishing Limited 21.04.2020
Emerald Group Publishing Limited
Subjects
Asymmetry
Capital
Capital costs
Capital markets
Compliance
Creditors
Disclosure
Hypotheses
Institutional investments
Literature reviews
Mitigation
Regression analysis
Reputations
Risk reduction
Social responsibility
Society
Australia
Cost of debt
Risk
CSR
Cost of equity
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Summary:Purpose This paper aims to investigate the association between the corporate social responsibility (CSR) and the cost of equity (COE) and cost of debt (COD). Design/methodology/approach The authors use the multivariate regression analysis approach to address the developed hypotheses. Findings Using a sample of 230 Australian listed firms from 2004 to 2016, the authors document that firms complying with higher CSR affect both COE and COD negatively, which means that CSR disclosure reduces financing cost. Practical implication These results support the risk mitigation perspective of CSR compliance, showing that both the investors and creditors may lower their expected returns because they find that CSR can mitigate potential business risk. Originality/value The authors extend the CSR research with both COE and COD.
ISSN:1747-1117
1758-857X
DOI:10.1108/SRJ-08-2018-0208