EconPapers    
Economics at your fingertips  
 

A Matter of Trust? The Bond Market Benefits of Corporate Social Capital during the Financial Crisis

Hami Amiraslani, Karl Lins, Henri Servaes and Ane Tamayo

No 12321, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We investigate whether a firm's social capital, and the trust that it engenders, are viewed favorably by bondholders. Using the financial crisis as an exogenous shock to trust, and firms' corporate social responsibility (CSR) activities as a proxy for social capital, we show that high-CSR firms benefited from lower bond spreads in the secondary market during the financial crisis compared to low-CSR firms. These findings are more pronounced for firms that, when in distress, have a greater opportunity to engage in asset substitution or divert cash to shareholders. High-CSR firms were also able to raise more debt capital on the primary market during this period, and those high-CSR firms that raised more debt were able to do so at lower at-issue bond spreads, better initial credit ratings, and for longer maturities. Our results suggest that debt investors believe that high-CSR firms are less likely to engage in asset substitution and diversion that would be detrimental to stakeholders, including debtholders. These findings also indicate that the benefits of CSR that accrued to shareholders during the financial crisis carry across to another important asset class, debt capital.

Keywords: corporate bonds; cost of debt; CSR; financial crisis; social capital; Trust (search for similar items in EconPapers)
JEL-codes: G12 G21 G32 M14 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-cfn, nep-fmk and nep-soc
Date: 2017-09
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4) Track citations by RSS feed

Downloads: (external link)
http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=12321 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:12321

Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... rs/dp.php?dpno=12321

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().

 
Page updated 2019-11-16
Handle: RePEc:cpr:ceprdp:12321