Business Law, Public Responsibility, and Ethics Commons^™

Corporate Social Responsibility And Bond Price At Issuances: Us Evidence, Hong Zhao, Wei Du, Hao Shen, Xinting Zhen

Economics & Finance Faculty Publications

Bondholders are arm's-length lenders with limited insider information. In this paper, we explore whether corporate social responsibility (CSR) activities could work as an information channel for bondholders to better understand the riskiness of bond-issuing firms. We find a significant negative relation between CSR scores and corporate bond yield spread, especially for firms which invest heavily in diversity and community relations, suggesting that CSR firms are less risky. The result is robust to different model specifications and endogeneity issues. In addition, the negative relation between the CSR score and bond yield spread is significant only if a firm has a strong …