Do CSR pillars have an effect on credit risk? An empirical comparison between Canadian and Mexican firms

Sammanfattning: This paper aims to empirically examine the effect, if any, of each Corporate Social Responsibility dimension (i.e., Environmental, Social, and Governance activities) on firms’ credit risk for two countries with a different CSR culture, Canada and Mexico. We used Probability of Default and Credit Default Swaps spread, with 1-year and 5-years maturities, as credit risk proxies for a sample of 287 firms from both countries for the period of 2011-2020. This study employs fixed-effects (FE) models to run the regressions on the unbalanced panel data set. The results do not show a statistically significant effect of any of the CSR pillars on credit risk either in Canada or in Mexico; but we do obtain similar results for both countries, despite of their contrasting CSR cultures. Additionally, these findings do not discard a relation between CSR and credit risk in the two countries. Our results keep consistent among different robust tests. Moreover, this publication extends the availability of CSR effects literature with emphasized research in countries outside the US and Europe.