{"title":"Impact of corporate social responsibility on cost of debt in Scandinavian public companies","authors":"V. Aleknevičienė, Sandra Stralkutė","doi":"10.24136/oc.2023.016","DOIUrl":null,"url":null,"abstract":"Research background: In recent decades, companies have paid increasing attention to corporate social responsibility (CSR) and its related performance. Scandinavian countries lead the world in CSR and sustainability. The good CSR performance of Scandinavian companies has motivated studies on this phenomenon, particularly on the connection between a company's CSR and its performance. One of the most important performance indicators and value drivers is the cost of debt.\nPurpose of the article: This study assessed the impact of CSR on the cost of debt in Scandinavian public companies.\nMethods: The research was divided into two stages. In the first stage, Scandinavian public companies were divided into two groups (with and without ESG (environmental, social, governance) disclosure scores) to reveal differences in the cost of debt. In the second stage, a fixed-effects regression model for balanced panel data sets was applied from 2011 to 2020 to assess the impact of ESG and its pillars on the cost of debt.\nFindings & value added: The results revealed that the cost of debt of companies in Scandinavian countries with ESG disclosure scores was significantly lower. The ESG disclosure scores of these companies have increased significantly over the past 10 years. We found a positive impact of CSR on the cost of debt in Scandinavian public companies. The increase in ESG disclosure and pillar scores reduced the cost of debt. These findings are valuable from a scientific perspective. Scandinavian public companies with ESG scores have higher financial risk, but lower cost of debt. These results support the importance of investors' behavior, information asymmetry, and signaling. The findings have several implications for shareholders, managers and creditors. They suggest that creditors consider ESG disclosures when determining a borrower's creditworthiness. Additionally, it is a message to regulators that the debt market values ESG disclosures.","PeriodicalId":46112,"journal":{"name":"Oeconomia Copernicana","volume":null,"pages":null},"PeriodicalIF":7.6000,"publicationDate":"2023-06-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Oeconomia Copernicana","FirstCategoryId":"96","ListUrlMain":"https://doi.org/10.24136/oc.2023.016","RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"ECONOMICS","Score":null,"Total":0}
引用次数: 0
Abstract
Research background: In recent decades, companies have paid increasing attention to corporate social responsibility (CSR) and its related performance. Scandinavian countries lead the world in CSR and sustainability. The good CSR performance of Scandinavian companies has motivated studies on this phenomenon, particularly on the connection between a company's CSR and its performance. One of the most important performance indicators and value drivers is the cost of debt.
Purpose of the article: This study assessed the impact of CSR on the cost of debt in Scandinavian public companies.
Methods: The research was divided into two stages. In the first stage, Scandinavian public companies were divided into two groups (with and without ESG (environmental, social, governance) disclosure scores) to reveal differences in the cost of debt. In the second stage, a fixed-effects regression model for balanced panel data sets was applied from 2011 to 2020 to assess the impact of ESG and its pillars on the cost of debt.
Findings & value added: The results revealed that the cost of debt of companies in Scandinavian countries with ESG disclosure scores was significantly lower. The ESG disclosure scores of these companies have increased significantly over the past 10 years. We found a positive impact of CSR on the cost of debt in Scandinavian public companies. The increase in ESG disclosure and pillar scores reduced the cost of debt. These findings are valuable from a scientific perspective. Scandinavian public companies with ESG scores have higher financial risk, but lower cost of debt. These results support the importance of investors' behavior, information asymmetry, and signaling. The findings have several implications for shareholders, managers and creditors. They suggest that creditors consider ESG disclosures when determining a borrower's creditworthiness. Additionally, it is a message to regulators that the debt market values ESG disclosures.
期刊介绍：
The Oeconomia Copernicana is an academic quarterly journal aimed at academicians, economic policymakers, and students studying finance, accounting, management, and economics. It publishes academic articles on contemporary issues in economics, finance, banking, accounting, and management from various research perspectives. The journal's mission is to publish advanced theoretical and empirical research that contributes to the development of these disciplines and has practical relevance. The journal encourages the use of various research methods, including falsification of conventional understanding, theory building through inductive or qualitative research, first empirical testing of theories, meta-analysis with theoretical implications, constructive replication, and a combination of qualitative, quantitative, field, laboratory, and meta-analytic approaches. While the journal prioritizes comprehensive manuscripts that include methodological-based theoretical and empirical research with implications for policymaking, it also welcomes submissions focused solely on theory or methodology.
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