scholarly journals Does sustainability foster the cost of equity reduction? The relationship between corporate social responsibility (CSR) and riskiness worldwide

2018 ◽  
Vol 12 (12) ◽  
pp. 381-395 ◽  
Author(s):  
Salvi Antonio ◽  
Petruzzella Felice ◽  
Giakoumelou Anastasia
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Cost Of Equity ◽  
Corporate Social ◽  
The Cost ◽  
The Relationship

Corporate social responsibility and firms’ cost of equity: how does culture matter?

2017 ◽  
Vol 24 (1) ◽  
pp. 105-124 ◽  
Author(s):  
Marie-Louise Matthiesen ◽  
Astrid Juliane Salzmann
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Cost Of Equity ◽  
Content Type ◽  
Csr Strategies ◽  
Responsible Behavior ◽  
Level Data ◽  
Corporate Social ◽  
The Cost ◽  
The Relationship

Purpose The purpose of this paper is to examine the relationship between corporate social responsibility (CSR) and cost of equity in an international context assessing the moderating effect of culture on the relation between CSR and the cost of equity. Design/methodology/approach The authors use an international sample of 42 countries, and company-level data from 2002 to 2013, to address cross-country variations in the effects of CSR on cost of equity in different cultural contexts. Findings The authors first substantiate previous research and show that the more a company is engaged in CSR, the lower its cost of equity. The authors then find that the relationship between CSR and cost of equity is stronger in countries with lower levels of assertiveness and higher levels of humane orientation and institutional collectivism. Practical implications The study advances understanding of how national culture promotes socially and environmentally responsible behavior. The implementation of CSR strategies depends on cultural norms, so companies need to be sensitive to local demands and adjust their CSR approaches accordingly. Originality/value The paper highlights the need to study how culture influences the relationship between CSR and cost of equity.

Corporate investment in social responsibility versus dividends?

2012 ◽  
Vol 8 (2) ◽  
pp. 199-207 ◽  
Author(s):  
Michel T.J. Rakotomavo
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Design Methodology ◽  
Corporate Investment ◽  
Cash Flows ◽  
Cost Of Equity ◽  
Content Type ◽  
Corporate Social ◽  
The Cost ◽  
Practical Implications

PurposeThe paper aims to examine whether corporate investment in social responsibility takes away from expected dividends.Design/methodology/approachThe article builds two hypotheses that are tested empirically through the analysis of 17,670 US firm‐year observations covering the period 1991‐2007. The tests are conducted in both univariate and multivariate settings.FindingsThe evidence supports the hypothesis that mature firms tend to invest more in corporate social responsibility (CSR). Specifically, firms investing highly in CSR tend to be larger, more profitable, and with greater earned (rather than contributed) equity. The evidence also supports the hypothesis that CSR investment does not subtract from dividends. Instead, CSR effort and dividend tend to increase together. Thus, CSR investment tends to be effected by companies who can afford it, and it does not lower value by lowering investors' expected payout.Practical implicationsThese results imply that spending resources on CSR does not lower the cash flows paid out to investors. When combined with the finding that CSR lowers the cost of equity, they also mean that CSR increases the value of a company's stock.Originality/valueThis is the first study that explicitly links CSR to the dividend flow.

Voluntary Nonfinancial Disclosure and the Cost of Equity Capital: The Initiation of Corporate Social Responsibility Reporting

2011 ◽  
Vol 86 (1) ◽  
pp. 59-100 ◽  
Author(s):  
Dan S. Dhaliwal ◽  
Oliver Zhen Li ◽  
Albert Tsang ◽  
Yong George Yang
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Voluntary Disclosure ◽  
Equity Capital ◽  
Forecast Errors ◽  
Cost Of Equity Capital ◽  
Cost Of Equity ◽  
Csr Disclosure ◽  
Corporate Social ◽  
The Cost

ABSTRACT: We examine a potential benefit associated with the initiation of voluntary disclosure of corporate social responsibility (CSR) activities: a reduction in firms’ cost of equity capital. We find that firms with a high cost of equity capital in the previous year tend to initiate disclosure of CSR activities in the current year and that initiating firms with superior social responsibility performance enjoy a subsequent reduction in the cost of equity capital. Further, initiating firms with superior social responsibility performance attract dedicated institutional investors and analyst coverage. Moreover, these analysts achieve lower absolute forecast errors and dispersion. Finally, we find that firms exploit the benefit of a lower cost of equity capital associated with the initiation of CSR disclosure. Initiating firms are more likely than non-initiating firms to raise equity capital following the initiations; among firms raising equity capital, initiating firms raise a significantly larger amount than do non-initiating firms.

scholarly journals Does the provision of voluntary corporate social responsibility disclosure influence the cost of equity capital? Evidence from Australia and the United Kingdom

2011 ◽  
Vol 8 (4) ◽  
pp. 201-213 ◽  
Author(s):  
Qiao Liu ◽  
Charl de Villiers
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Equity Capital ◽  
Global Reporting Initiative ◽  
Cost Of Equity Capital ◽  
Cost Of Equity ◽  
Corporate Social Responsibility Disclosure ◽  
Alternative Measures ◽  
Corporate Social ◽  
The Cost

The practice of managers of firms making voluntary social disclosures has become widespread. Corporate ownership (shareholders) will be interested to know whether these voluntary social disclosures affect them by influencing the firm’s cost of equity capital. This study investigates the relationship between the voluntary corporate social responsibility disclosure of Australian and UK firms, based on the 2008 KPMG International Survey of Corporate Social Responsibility Reporting and the cost of equity capital based on the Botosan and Plumlee (2005) model. Using a sample of 59 firms ranked in the top 100 of Australian and UK firms, we find that firms making voluntary corporate social responsibility disclosure in compliance with the Global Reporting Initiative Guidelines are associated with an increased cost of equity capital. Our main results are robust to several alternative measures of voluntary corporate social responsibility disclosure. These results can be attributed to two reasons. Firstly, firms making voluntary corporate social responsibility disclosure provide information that allows certain traders to make judgments about a firm’s performance that are superior to the judgments of other traders. As a result, there may be more information asymmetry amongst traders. Secondly, shareholders consider that the information production and proprietary costs associated with voluntary corporate social responsibility disclosure outweighs its potential benefits. Both explanations suggest that investors will impose a higher cost of equity on firms making voluntary corporate social responsibility disclosure. In the additional tests, we show that our main results are robust to alternative measures of voluntary corporate social responsibility disclosure.

scholarly journals Which Corporate Social Responsibility Performance Affects the Cost of Equity? Evidence from Korea

2019 ◽  
Vol 11 (10) ◽  
pp. 2947 ◽  
Author(s):  
Youngkyung Ok ◽  
Jungmu Kim
Keyword(s):  
Environmental Management ◽  
Corporate Governance ◽  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Firm Value ◽  
Cost Of Equity ◽  
Socially Responsible ◽  
Responsible Management ◽  
Corporate Social ◽  
The Cost

This study analyzes the effect of corporate social responsibility activities on the cost of equity in Korea. We find that firms with better corporate social responsibility (CSR) performance generally exhibit cheaper equity financing. Considering three dimensions of CSR separately, we find that a higher “socially responsible management” significantly reduces the cost of equity by 1.13%-1.37% per annum and “Corporate governance” activity also marginally affects the cost of equity, while “environmental management” has no impact. Our result is robust in controlling for systematic risk, size, leverage ratio, and the number of analysts. These results imply that enhancing socially responsible management and corporate governance can increase firm value in Korea, but environmental management is not relevant for firm values. Putting differently, investors tolerate a lower return from firms with more CSR activities, because they expect them to provide sustainable incomes. Future researches can extend our approach to examining the effect on the cost of debt and cost of capital.

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