Corporate Bond Covenants and Social Responsibility Investment

Shi, Guifeng; Sun, Jianfei

doi:10.1007/s10551-014-2272-y

Cited by 32 publications

(25 citation statements)

References 70 publications

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“…Shareholder-related CSR activities include sound financial structures, transparent information disclosures, positive innovations, and high-level stock returns. The sound employment of funds is the basic rule for a firm to meet its shareholders' interests, since unsafe, unreasonable financial structure directly induces shareholders' financial losses, such as high-level debts [59] and excessive earnings management [60]. In addition, in order to create high-level of return for shareholders, companies need to continuously engage in product and/or technological innovations.…”

Section: Shareholder-related Csr and Organizational Resiliencementioning

confidence: 99%

What Dimension of CSR Matters to Organizational Resilience? Evidence from China

Wei

et al. 2019

Sustainability

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Prior work on corporate social responsibility (CSR) has focused mainly on its effects on the short-term performance of firms from developed countries. In this article, we shed light on its effects on organizational resilience, which is defined as the firm's ability to positively cope with environmental turbulence, and operationalized by long-term, improved sales growth and financial volatility. In line with this operationalization, we adopt CSR's performance-enhancing and performance-insuring mechanisms to disentangle the relationship between CSR and organizational resilience. Furthermore, we divide CSR into five dimensions, namely shareholder, employee, business, society and environment-related CSR, and respectively examine their impacts on organizational resilience. The empirical study on a large sample of public firms in China from 2010 to 2017 shows that CSR as a whole significantly increases the firms' long-term growth and reduces their financial volatility. As for the five specific dimensions, they all have a significant negative effect on financial volatility, and the employee, business, environment-related CSR are positively associated with long-term growth. Yet, the empirical results did not indicate significant associations between shareholder and society-related CSR and firms' long-term growth. This study first explores the impacts of CSR's different dimensions on organizational resilience. Also, we contribute to enriching the literature on CSR by examining the long-term performance-insuring effect of CSR with a quantitative analysis of emerging markets. Finally, we discuss some important managerial implications, as well as promising directions for future research.2 of 23 conditions, unestablished industrial structures, and the intense, chaotic competition brought by rapid development, Chinese enterprises are likely to face more changes and uncertainties in their business environment, which makes them more vulnerable than those from developed countries. Second, as the concern about CSR in China comes far later than that in developed countries, the effect of Chinese CSR on organizational resilience may be different. The Kinder, Lydenberg, and Domini (KLD) database, for example, began to internationally provide ratings of corporate social performance in 1991. While, the first official research report on Chinese CSR was released in 2009, and then Chinese listed companies were required to issue their annual CSR reports. In line with this, we aim at providing some new insights of CSR and its effects on organizational resilience with evidence from emerging markets.In doing so, we first clarify the conceptualization and operationalization of organizational resilience. Defined as the ability of an organization to respond positively to environmental changes, organizational resilience is a latent, unobservable construct usually measured by its outcomes [6]. The most desired outcome of organizational resilience recognized in extant literature is a firm's persistent superior performance in the changing business en...

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Section: Shareholder-related Csr and Organizational Resiliencementioning

confidence: 99%

What Dimension of CSR Matters to Organizational Resilience? Evidence from China

Wei

et al. 2019

Sustainability

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“…Moreover, higher quality loans offer a lower need for risk provisions. This conclusion is further confirmed by the lower number of debt covenants for firms with higher CSR investments (Shi & Sun, 2015).…”

Section: Discussionmentioning

confidence: 60%

Corporate Social Responsibility and Banks’ Financial Performance

Gangi¹,

Mustilli²,

Varrone³

et al. 2018

IBR

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This study analyzes whether and how corporate social responsibility (CSR) affects the financial performance of the European banking industry. According to agency theory, CSR engagement should be negatively related to financial performance. By contrast, from the stakeholder perspective and according to the resource-based view, CSR should positively impact banks' financial performance. Over a period of six years (2009)(2010)(2011)(2012)(2013)(2014)(2015) following the explosion of the sub-prime crisis, the econometric estimates of the current study confirm a positive effect of CSR engagement on banks' financial performance. Net interest income and profitability increase with the increase in social performance. At the same time, CSR is negatively related to non-performing loans. Therefore, in contrast to the trade-off model, our results support a win-win vision of the relationship between the social and financial performance of banks.

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“…For bank loans, similar conclusions have been drawn that corporations with worse CSR performance and greater CSR uncertainty might face higher loan spreads [18]. Better CSR performance corporations are generally more transparent in disclosing corporation information, and attach importance to constraints and bond covenants [19,20], which might help to bring down agency costs and issuing costs [21].Better corporate governance also serves as a factor that might reduce capital costs [22,23], since internal governance disclosure might mitigate information and agency costs [24] through reducing information asymmetry [25] and inducing effective monitoring [26]. Specifically, corporations reporting a large sum of unaudited earnings have a higher cost of equity, while those that have gone through independent audits have a lower cost of equity [27].…”

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confidence: 68%

mentioning

confidence: 83%

Can ESG Performance Affect Bond Default Rate? Evidence from China

Zhou

Xiong

2020

Sustainability

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Capturing determinants of bond default risks has aroused heated discussions ever since the "rigid payment" system collapsed in China. Within this context; this paper aims to clarify the relation between an issuer's environmental; social; and corporate (ESG) performance and its bond default rate. We developed an ESG factors-embedded Logistic Regression model to empirically examine Chinese default bonds and outstanding industrial bonds from 2014 to 2019. Results indicate that the bond default rate is positively correlated with the company's energy consumption and negatively correlated with its attention to social responsibilities; and corporate governance; in addition to its financial performances. In conclusion; to fully take ESG factors into consideration during the decision-making process and daily operations might improve stability and credibility of corporations in modern Chinese national context. Sustainability 2020, 12, 2954 2 of 12 them [6][7][8]. With the gradual pace of the global popularization of the ESG framework, scholars are now more aware of the impact of ESG performance on corporate financial behavior.Relevant research and empirical results have been mainly from American data. From the environmental perspective, studies noted that better environmental risk management correlates with lower capital cost, since it might result in a lower beta of the corporation, higher resource utilization, and favorable tax benefits [9,10]. Chava, on the other hand, conducted empirical research to provide concrete evidences that investors in the capital market do really value the borrower's environmental externalities from specific aspects, including environmental concerns and strengths, waste emission, and actions in pollution prevention [11]. To be more specific, debtholders are more cautious about the corporation's environmental performance if the corporation faces higher environmental risks, which might lead to bankruptcy risks [12].Social responsibility, which can be perceived as an investment in fostering trust between the company and stakeholders, is also crucial in guaranteeing stable or satisfying financial revenue and lower business risks. Lins et al. pointed out that firms that have a stronger sense of corporate social responsibility (CSR) have higher stock returns as well as better financial performance during economic crises [13]. In other words, investments in CSR might provide a buffer for the company during business downswings. From the perspective of capital cost, Ghoul et al. examined the effect of CSR on the cost of equity for US firms and found that firms with better CSR scores enjoy lower equity cost while firms which participate in tobacco and nuclear power production bear higher costs [14]. Researchers concluded that corporate bond yield spreads are in correlation with CSR performance as well, since high-CSR performance corporations are generally granted higher credit ratings during issuance [15][16][17]. For bank loans, similar conclusions have been drawn that corporations with worse CSR perfo...

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Corporate Bond Covenants and Social Responsibility Investment

Cited by 32 publications

References 70 publications

What Dimension of CSR Matters to Organizational Resilience? Evidence from China

What Dimension of CSR Matters to Organizational Resilience? Evidence from China

Corporate Social Responsibility and Banks’ Financial Performance

Can ESG Performance Affect Bond Default Rate? Evidence from China

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