CSR & debt funding: The impact of corporate social responsibility on borrowing costs in the market

Sammanfattning: This paper examines the relationship between credit ratings and aggregate, as well as individual pillar CSR scores during the periods of 2009 and 2014 for European corporations. The results indicate that the aggregate CSR scores did not influence credit ratings for either period. However, social pillar scores had a statistically significant impact on credit ratings during the financial crisis of 2009, but not during the 2014 period. Furthermore, the 2009 relationship is driven by firms that perform especially well in terms of social pillar performance, and firms that performed poorly saw their credit rating unaffected. The 2009 relationship is deemed to be a factor of society valuing social pillar CSR efforts more highly during a period with plenty of societal hardship. Hence, corporate managers should aim to identify which CSR pillar is of special importance at present to reap the benefits on the corporations' cost of debt in capital markets. Furthermore, managers should maintain a flexible organization as it pertains to CSR work, in order to quickly pivot into areas where the benefit for the organization is the largest.