Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5089831 | Journal of Banking & Finance | 2011 | 19 Pages |
Abstract
We examine the effect of corporate social responsibility (CSR) on the cost of equity capital for a large sample of US firms. Using several approaches to estimate firms' ex ante cost of equity, we find that firms with better CSR scores exhibit cheaper equity financing. In particular, our findings suggest that investment in improving responsible employee relations, environmental policies, and product strategies contributes substantially to reducing firms' cost of equity. Our results also show that participation in two “sin” industries, namely, tobacco and nuclear power, increases firms' cost of equity. These findings support arguments in the literature that firms with socially responsible practices have higher valuation and lower risk.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Sadok El Ghoul, Omrane Guedhami, Chuck C.Y. Kwok, Dev R. Mishra,