Corporate social responsibility and Eurozone corporate bonds: The moderating role of country sustainability |
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| Institution: | 1. Department of Economics and Finance, University of Rome Tor Vergata, Italy;2. Department of Economics and Finance, University of Rome Tor Vergata, Italy;3. CEIS, University of Rome Tor Vergata, Italy;4. RCEA, Rimini, Italy;5. Fordham University, 45 Columbus Avenue, 5th Floor, New York, NY 10023, USA;6. Bank of Finland, Finland;1. Assistant Professor of Finance at Gordon Ford College of Business, Western Kentucky University, United States;2. Professor and Paul C. Wise Chair of Finance at Spears School of Business, Oklahoma State University, United States;1. Department of Accounting, Monash University, 900 Dandenong Road, Caulfield East, VIC 3145, Australia;2. University of Memphis, School of Accountancy, Fogelman College of Business and Economics, Memphis, TN 38152-6460, United States;1. The Education University of Hong Kong, Tai Po, New Territories, Hong Kong SAR, P. R. China;2. Department of Social Sciences, The Education University of Hong Kong, Tai Po, New Territories, Hong Kong SAR, P. R. China;3. School of Management, Zhejiang University, Hangzhou, Zhejiang, P. R. China |
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| Abstract: | In this paper, we empirically examine whether superior performance in corporate social responsibility (CSR) results in lower credit risk, measured by credit ratings and zero-volatility spreads (z-spreads). We are especially interested in how the environmental, social, and governance (ESG) related performance of the corresponding countries moderates this relationship. We find only weak evidence that superior corporate social performance (CSP) results in systematically reduced credit risk. However, we do find strong support for our hypothesis that a country’s ESG performance moderates the CSP–credit risk relationship. Superior CSP is regarded as risk-reducing and rewarded with better ratings and lower z-spreads only if it is recognized by the environment. In addition, we find a reduction of corporate bonds’ z-spreads by approx. 9.64 basis points if the CSP of a company mirrors the ESG performance of the country it is located in. |
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| Keywords: | European corporate bond markets Corporate social responsibility (CSR) Rating Z-spread G12 G24 M14 |
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