Do CSR Ratings Affect Loan Spreads? Evidence from European Syndicated Loan Market

Danilo Drago and Concetta Carnevale
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Danilo Drago: Department of Business Administration and Law, University of Calabria, 87036 Rende, Italy
Concetta Carnevale: Department of Culture, Education and Society, University of Calabria, 87036 Rende, Italy

Sustainability, 2020, vol. 12, issue 18, 1-30

Abstract: We investigate whether corporate social responsibility (CSR) ratings affect the syndicated loan spreads paid by European listed firms. By performing ordinary least squares (OLS) pooled regressions on a sample of 1101 syndicated loans granted to European companies, we find evidence that borrowers’ CSR ratings have a significant impact on loan spreads. However, the relationship between CSR ratings and loan spreads is quite complex. Low CSR-rated firms pay higher loan spreads than better CSR-rated firms, but high CSR ratings are not always rewarded by lenders. The benefits of a high CSR rating level are significant only for firms located in countries that pay great attention to sustainability issues. Overall, our work provides a key to reconciling the mixed results obtained in the empirical literature, as we find evidence of a significant lack of homogeneity within the European Union countries regarding the relationship between CSR performance and the cost of debt financing.

Keywords: corporate social responsibility; CSR rating; bank loan spread; European syndicated loan market (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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