Corporate social responsibility and Eurozone corporate bonds: The moderating role of country sustainability

Christoph Stellner, Christian Klein and Bernhard Zwergel

Journal of Banking & Finance, 2015, vol. 59, issue C, 538-549

Abstract: In this paper, we empirically examine whether superior performance in corporate social responsibility (CSR) results in lower credit risk, measured by credit ratings and zero-volatility spreads (z-spreads). We are especially interested in how the environmental, social, and governance (ESG) related performance of the corresponding countries moderates this relationship. We find only weak evidence that superior corporate social performance (CSP) results in systematically reduced credit risk. However, we do find strong support for our hypothesis that a country’s ESG performance moderates the CSP–credit risk relationship. Superior CSP is regarded as risk-reducing and rewarded with better ratings and lower z-spreads only if it is recognized by the environment. In addition, we find a reduction of corporate bonds’ z-spreads by approx. 9.64 basis points if the CSP of a company mirrors the ESG performance of the country it is located in.

Keywords: European corporate bond markets; Corporate social responsibility (CSR); Rating; Z-spread (search for similar items in EconPapers)
JEL-codes: G12 G24 M14 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (123)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:59:y:2015:i:c:p:538-549

DOI: 10.1016/j.jbankfin.2015.04.032

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