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Media, reputational risk, and bank loan contracting

Leonardo Becchetti () and Stefano Manfredonia

Journal of Financial Stability, 2022, vol. 60, issue C

Abstract: We investigate how reputational risk arising from traditional and online media coverage of Corporate Social Irresponsibility (CSI) conducts affects the cost of borrowing and what are the factors that can mitigate or amplify this effect. First, we find that negative media attention increases bank loan costs and show that this result is robust to endogeneity concerns and alternative measures of key variables. Next, we find that the impact of negative media attention on bank loan costs is more severe if the misconduct involves borrowers with prior high Corporate Social Responsibility (CSR) reputations, while it is smaller when prior lending relationships exist between the lead arranger and the borrower.

Keywords: Bank sustainability performance; Corporate social responsibility; Negative media attention; Business ethics (search for similar items in EconPapers)
JEL-codes: G21 M14 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:60:y:2022:i:c:s1572308922000183

DOI: 10.1016/j.jfs.2022.100990

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Journal of Financial Stability is currently edited by I. Hasan, W. C. Hunter and G. G. Kaufman

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