Do Firms Adjust Corporate Social Responsibility Engagement after a Focal Change in Credit Ratings?
Business & Society, Forthcoming
49 Pages Posted: 19 Dec 2016 Last revised: 14 Aug 2021
Date Written: June 20, 2021
Abstract
This study revisits the relation between corporate performance and corporate social responsibility (CSR) in the context of a major shift in firms’ credit risk status. Relying on corporate credit rating as a performance indicator, we examine whether firms under the scrutiny of rating agencies trade-off CSR engagement for credit quality improvement. To explore whether firms adjust their CSR engagement after a focal rating change, we focus on the investment-speculative grade threshold, because of its importance in accessing the public debt market. We find that firms who lose the investment grade rating subsequently increase CSR engagement. We also uncover that improving CSR engagement help firms restore their credit ratings ex-post. Our findings support the view of CSR engagement as a valuable risk-management strategy.
Keywords: Corporate social responsibility, Credit ratings, Investment-Speculative grade, Risk management, Stakeholder management
JEL Classification: G24, G30, G32
Suggested Citation: Suggested Citation