Does corporate social responsibility facilitate credit ratings: Evidence from Rule 144A bonds

Kelly Cai, Steven X. Zhu and Hui Zhu

Finance Research Letters, 2025, vol. 76, issue C

Abstract: We investigate how corporate social responsibility (CSR) influences the initial credit rating of Rule 144A bonds. Our findings indicate that socially responsible issuers are rewarded with better initial ratings. This result persists even for each environmental, social, and governance component. We further show that foreign issuers with strong CSR receive more favorable initial ratings than their domestic peers. Additionally, issuers with higher CSR can issue larger amounts at lower borrowing costs. Results from instrumental variables and entropy balance analyses show robustness accounting for endogeneity. Our findings suggest that CSR efforts are recognized and rewarded in the Rule 144A market.

Keywords: CSR; Rule 144A bonds; Foreign issuers; Credit ratings; Borrowing costs (search for similar items in EconPapers)
JEL-codes: F34 G12 K0 M14 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:76:y:2025:i:c:s1544612325002181

DOI: 10.1016/j.frl.2025.106954

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