ATJ Asian Tax Journal

Asian Tax Journal

Print ISSN 1738-3323 Online ISSN 2733-9270

The Relationship between Corporate Social Responsibility and the Cost of Debt Capital, Focusing on the Impact of Firm Size and Asset Efficiency

  • Sun-Hwa Kim Chonnam National University

Asian Tax Journal Vol. 16 No. 2 (2015), pp. 9-43

Abstract

This study empirically evaluates the relationship between corporate social responsibility(CSR) and the cost of debt capital. More specifically, this study analyzes whether the association between CSR and debt capital cost is influenced by the firm size and asset efficiency. Additionally, I evaluate whether sustainability report has an effect on debt capital cost. The major findings of this study are as follows. First, this study assesses the relationship between the propensity of CSR superiority(dCSR) and the cost of debt capital(COD, COD-S, AJ-COD-S) for the total sample. The result of this study indicates a negative relationship between the propensity of CSR superiority and the cost of debt capital. This implies that firms with the propensity of CSR superiority enjoy lower debt capital cost than them without the propensity of CSR superiority. Second, this study analyzes that the association between the propensity of CSR superiority and the cost of debt capital is affected by firm size. I find that a negative relationship between the propensity of CSR superiority and the cost of debt capital is revealed to be a more increase on the CSR activities of small/medium size companies. Third, I find that a negative relationship between the propensity of CSR superiority and the debt capital cost is decreased in firms with no-asset efficiency, which is different in two groups(large size companies and small/medium size companies). Finally, there is no relationship between the disclosure of sustainability report(dSR) and the cost of debt capital. The results of this study suggest that companies with higher CSR performance experience lower debt capital cost.

Keywords

  • corporate social responsibility
  • firm size
  • asset efficiency
  • debt capital coat
  • sustainability report

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Asian Tax Journal

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