Footnote:
In: Journal of Banking & Finance, Vol. 35, Issue 9, pp. 2388-2406, September 2011
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments July 1, 2010 erstellt
Description:
We examine the effect of corporate social responsibility (CSR) on the cost of equity capital for a large sample of U.S. firms. Using several approaches to estimate firms' ex ante cost of equity, we find that firms with better CSR rankings 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