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Corporate Social Responsibility and Rule 144A Debt Offerings: Empirical Evidence

Wassim Dbouk (), Dawei Jin (), Haizhi Wang () and Jianrong Wang ()
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Wassim Dbouk: Suliman S. Olayan School of Business, American University of Beirut, Beirut 1107 2020, Lebanon
Dawei Jin: Information and Safety Engineering School, Zhongnan University of Economics and Law, 182 Nahu Ave, East Lake High-Tech Development Zone, Wuhan 430073, China
Haizhi Wang: Stuart School of Business, Illinois Institute of Technology, 565 W Adams St, Chicago, IL 60661, USA
Jianrong Wang: Stuart School of Business, Illinois Institute of Technology, 565 W Adams St, Chicago, IL 60661, USA

International Journal of Financial Studies, 2018, vol. 6, issue 4, 1-18

Abstract: Rule 144A allows a firm to issue securities without a public registration statement with the Securities and Exchange Commission, and only qualified institutional investors can purchase such securities. In this study, focusing on corporate bonds issued under Rule 144A, we empirically investigate the relationship between the corporate social responsibility (CSR) of issuing firms and the bond yield spread at issuance. We document a significant and positive relation between CSR concerns, whereas CSR strengths seem to play an insignificant role in determining bond yield spread. Our main findings are robust to the instrumental variable approach and simultaneous equation estimation to address the potential endogeneity issues. We further explore the time-series changes in issuing firms’ CSR profiles, and report that institutional investors demand a higher bond yield spread when issuing firms’ exposure to higher social, environmental, and stakeholder concerns. Our analyses reveal that the main sources of such risk exposure are stakeholder conflict and concerns from primary stakeholder groups.

Keywords: private placement; Rule 144A; bond yield spread; corporate social responsibility (search for similar items in EconPapers)
JEL-codes: G1 G2 G3 F2 F3 F41 F42 (search for similar items in EconPapers)
Date: 2018
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