Corporate Social Responsibility and Credit Rating－Evidence from Korean Firms－
Asian Tax Journal Vol. 14 No. 6 (2013), pp. 203-225
Abstract
This paper examines the associations between corporate social responsibility(Hereafter CSR) and credit rating in Korea. CSR is essential activity for the firm’s sustainable growth then CSR activity has much attention from academy as well as industry. Prior literatures suggest that CSR is positive association with firm value in Korea. However Goss and Roberts(2011) suggest that CSR is negative(－) association with bank loan which is due to manager's private uses for CSR investment money into their private benefit and over optimal use of CSR investment can be value destructive for the firm. So it can be an open empirical question on these issues. Also there is limited research has been done with CSR and credit rating using Korean firm－year observations. The empirical results is as follows. Using 259 observations Korean data from 2005 to 2009, overall CSR is positively associated with credit rating which represent that credit rating agency recognize CSR as a positive perspective which can higher the firm value. This empirical result holds in firm level clustering analysis and ordered logit analysis. This paper has several contribution as follows. Prior literatures suggest that CSR is positively associated with firm value or lower the cost of equity capital, this is the first empirical paper with CSR and credit rating using Korean data then CSR can higher the credit rating. Also credit rating is essential indicator which is closely related to cost of debt capital then CSR activity can be an one of important determinant for the credit rating.
Keywords
- Corporate Social Responsibility
- Credit Rating
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