The linkage between CSR and cost of equity: an Indian perspective

Dahiya, Monika; Singh, Shveta

doi:10.1108/sampj-10-2019-0379

Cited by 37 publications

(28 citation statements)

References 68 publications

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“…Also in Asia, Suto and Takehara (2017) confirm this finding, as they cannot evidence a significant relation between CoE and corporate social performance from Japanese listed firms even though institutional ownership is evidenced to have a negative impact on capital costs. Lastly, in Asia, Dahiya and Singh (2020) confirm the correlation between CoE and ESG proxies considering Indian manufacturing firms. Breuer et al (2018) look into the relationship between CSR engagement, CoE and different levels of investor protection in a multi-country study, finding that if investor protection is high, firms with greater CSR investments decrease their CoE since CSR disclosures protect stockholders from insiders’ expropriation of firm's assets.…”

Section: Theoretical Framework and Hypotheses Developmentsupporting

confidence: 62%

“…Regarding sustainability engagement, CSR is defined as the relation with different stakeholders by integrating environmental and social elements inside the firms' business operations (Marrewijk, 2013). CSR involves a company's deliberate actions to boost the well-being of all members affected by its business operations and achieve a balance between economic and social goals (Dahiya and Singh, 2020). Sustainability engagement can be understood as the process by which companies integrate environmental and social activities into their business operations and their interactions with different stakeholders on a voluntary basis (European Commission, 2011).…”

Section: Introductionmentioning

confidence: 99%

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Sustainability engagement in Latin America firms and cost of equity

Jiménez

Zorio‐Grima

2021

ARLA

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PurposeCorporate social responsibility (CSR) actions are expected to reduce information asymmetries and increase legitimacy among the stakeholders of the company, which consequently should have a positive impact on the financial conditions of the firm. Hence, the objective of this paper is to find empirical evidence on the negative relationship between sustainable behavior and the cost of equity, in the specific context of Latin America. To address this issue, some proxies and moderating variables for sustainability are used in our study.Design/methodology/approachThe regression model considers a sample with 252 publicly trading firms and 2,772 firm-year observations, from 2008 to 2018. The generalized method of moments is used to avoid endogeneity problems.FindingsThe study finds evidence that firms with higher environmental, social and governance activities disclosed by sustainability reports and assured by external providers decrease their cost of equity, especially if they are in an integrated market as MILA. This finding confirms that agency conflicts between firm's management and stakeholders diminish with higher CSR transparency, leading to a lower cost of capital.Originality/valueOur research is unique and valuable as, to our knowledge, it is the first study to analyze the impact of sustainable behavior and the cost of equity from companies operating in Latin America.

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Section: Theoretical Framework and Hypotheses Developmentsupporting

confidence: 62%

Section: Introductionmentioning

confidence: 99%

Sustainability engagement in Latin America firms and cost of equity

Jiménez

Zorio‐Grima

2021

ARLA

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“…These findings are in contrast with studies performed with the US and European companies but consistent with results obtained in countries with different cultural, religion and social backgrounds and where legal protection to investors is weak. The conclusions of Dahiya and Singh (2020) reinforce the importance of exploring these topics in different geographies.…”

Section: Content Of the Special Issuementioning

confidence: 55%

“…In their study on the linkage between CSR and cost of equity, Dahiya and Singh (2020) present an Indian perspective on a study exploring the impact of CSR disclosures on the cost of equity capital of large Indian manufacturing firms. The study provides insights into the perceptions of investors, in terms of risk associated, toward firms engaging in CSR activities.…”

Section: Content Of the Special Issuementioning

confidence: 99%

Guest editorial

Simões

Duarte

Tanimoto

et al. 2021

SAMPJ

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Guest editorial IntroductionThis editorial presents an introduction to the special issue on the "Linkages and Complementarities between Ethics, Corporate Social Responsibility and Sustainability -Challenges for Science and Practice." This special issue originated at the fifth Symposium on Ethics and Social Responsibility Research 2019. The aim is to bring together a collection of original research papers that cover these three topics, promoting whenever possible a dialog to explore linkages and complementarities between them.Research related to topics of ethics, corporate social responsibility (CSR) and sustainability has gained increasing attention from both scholars and practitioners (Aguinis and Glavas, 2012;Carroll and Shabana, 2010;Treviño and Nelson, 2017) and motivated multiple special issues in various mainstream and specialist journals (Kudłak and Low, 2015). In practice, there is also an increasing expectation that organizations should be accountable for ensuring ethical internal and external processes, for the way they manage their relationship with the stakeholders, asking for a higher level of transparency in decision processes affecting society at large (Burchell and Cook, 2006;Carroll and Shabana, 2010;Treviño et al., 2014;Welsh et al., 2015). The same is true for environmental and social sustainability problems, which are increasingly important topics in public debates and concerns among individuals and communities (Murray et al., 2010;Stubblefield Loucks et al., 2010). Media pressure, for instance, may influence company disclosure in sectors such as fashion that is often under the spotlight (Auke and Simaens, 2019).Although the constructs of CSR and corporate sustainability have emerged from different streams in the literature, there are conceptual similarities and differences among them. Some argue that CSR is grounded in ethics and normative arguments, whereas corporate sustainability originated in a systems approach (Bansal and Song, 2017). In addition, although scholars in the 1970s focused mostly on CSR as opposed to the economic realities of profit maximization, in more recent decades, attention has also been devoted to corporate sustainability, often with a focus on its environmental dimension. Still, although CSR and corporate sustainability are clearly distinct constructs (Bansal and Song, 2017), the literature reveals a growing trend toward a more integrated approach to both topics that incorporates social, environmental and economic concerns into the equation. This trend seems quite compelling because, as Montiel (2008, p. 260) argues, "contemporary businesses must address economic prosperity, social equity, and environmental integrity before they can lay claim to socially responsible behaviour or sustainable practices." Hence, despite the separate pasts (Bansal and Song, 2017;Montiel, 2008), the constructs of CSR and corporate sustainability could share a common future (Montiel, 2008), and organizational ethics may well be the "magnetic force" behind this rapprochement.For instance, ...

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“…French firms that are oriented to ESG are expected to provide stakeholders with more information about companies that will aid in monitoring and evaluating them and, hence, reduce the cost of equity capital. As financial transparency has been proven to affect the cost of equity [7,8], it is interesting to examine how CSR interacts to affect the cost of equity capital. However, the link between CSR and the cost of equity is somewhat ambiguous, as previous literature has shown.…”

Section: Introductionmentioning

confidence: 99%

The Effect of Corporate Social Responsibility and the Executive Compensation on Implicit Cost of Equity: Evidence from French ESG Data

2021

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This research aimed to evaluate the effect of corporate social responsibility (CSR) and executive incentive compensation based on the achievement of sustainability goals on the implicit cost of equity. To test the study’s hypotheses, the authors applied linear regressions on panel data using the Thomson Reuters ASSET4 and Thompson Institutional Brokers Earnings Services (I/B/E/S) database of a sample of 154 French ESG firms over the 2015–2020 period. Our results show that CSR activities lower the cost of equity capital; hence, these activities are important to shareholders’ investment and financing decisions. The results have practical implications for investors and other partners interested in the business. Thus, using the implicit cost of equity is a better estimate of shareholder requirements in the context of socially responsible businesses. The results of this work could attract the attention of socially responsible investors and, especially, corporate citizens.

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The linkage between CSR and cost of equity: an Indian perspective

Cited by 37 publications

References 68 publications

Sustainability engagement in Latin America firms and cost of equity

Sustainability engagement in Latin America firms and cost of equity

Guest editorial

The Effect of Corporate Social Responsibility and the Executive Compensation on Implicit Cost of Equity: Evidence from French ESG Data

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