Interest rate marketization and corporate social responsibility

Yao Wang, Guangfan Sun, Xu Yan and Yunmeng Zhang

Finance Research Letters, 2025, vol. 83, issue C

Abstract: This study examines how interest rate marketization influences corporate social responsibility (CSR) performance and its underlying mechanisms through a quasi-natural experiment after the removal of the lending rate floor in China. Findings indicate that liberalizing the lending rate floor enhances CSR, particularly among firms with stronger signaling motives and higher signaling earnings. This suggests that interest rate marketization motivates firms to actively engage in CSR to positively signal banks and secure credit resources. Results show that firms with superior CSR tend to receive more low-cost loans after interest rate marketization. These findings highlight that financial marketization reform serves as an intrinsic motivator for firms to fulfill their CSR and emphasize the importance of promoting market development reform in transition economies.

Keywords: Interest rate marketization; Corporate social responsibility; Signaling; Financing constraints; Credit resource allocation (search for similar items in EconPapers)
JEL-codes: D33 G28 J31 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:83:y:2025:i:c:s1544612325010037

DOI: 10.1016/j.frl.2025.107745

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