This Master’s Thesis conducts a literature review of 32 studies, compiling the current knowledge about the impact of corporate social responsibility (CSR) practices, on companies’ debt costs, focusing on quantitative assessments.
The growing recognition of the role corporations play in addressing environmental and social challenges has been on the rise for several years. As businesses are increasingly being held accountable for their environmental and societal influence, the calling for active engagement in CSR issues is louder than ever before. Consequently, companies face a growing demand regarding CSR issues such as sustainability practices, social impact initiatives, ethical governance, and transparent disclosure of these. Apparently, the traditional sole purpose of profit-making and increasing shareholder value is evolving into a multifaceted commitment to diverse stakeholder demands.
CSR awareness and reporting on it have gained a lot of momentum in the last two decades. “2020 survey identified that 80% of N100 companies worldwide (the top 100 companies by revenue in 52 countries and jurisdictions) now report on sustainability, up by 5% since the last survey in 2017, while the reporting rate has reached 90% or more for the G250 group (the world’s largest 250 companies by revenue) since 2011”.
Within this context, the financial implications of CSR practices, particularly their impact on companies’ ability to finance operations and expansion plans, emerge as a critical area for investigation. A relatively unexplored aspect is the effect on companies’ debt, which marks the primary focus of examination in this thesis.
Table of Contents
1. Introduction
1.1. Problem Statement and Contribution of Research
1.2. Structure of Thesis
2. Background Information and Theories
2.1. Description of Sustainability Terminology
2.1.1. Sustainability
2.1.2. CSR
2.1.3. ESG
2.2. Theories Pertaining the CSR-CoD Relationship
2.2.1. Stakeholder Theory
2.2.2. Legitimacy Theory
2.2.3. Institutional Theory
2.2.4. Agency Theory
2.3. Regulatory Circumstances of CSR Disclosure
2.3.1. Selected Regional Regulatory Circumstances
2.3.2. Selected Reporting Initiatives
2.3.3. CSR Disclosure Trending from Voluntary to Mandatory
2.4. Alignment of Theories and Regulatory Circumstances
3. Methodology
3.1. Clarification of Factual Content of Scope
3.2. Procedure of Literature Research
3.3. Quality Assurance and Limitations
4. Literature Review Results
4.1. Literature Information
4.2. Measure Specifications of CSR
4.2.1. CSR Terminology in the Literature
4.2.2. Scope and Focus Areas of CSR
4.2.3. CSR Practices – Performance and Disclosure
4.2.4. Data Sources and Composition for Sustainability Measures
4.3. Measure Specifications of Cost of Debt
4.3.1. Debt Measure Variables
4.3.2. Data Sources and Definitions of Debt Measures
4.4. General Sample Information
4.4.1. Temporal Profile
4.4.2. Methodological Approaches
4.4.3. Geographical and Sectoral Distribution
4.5. Impact of CSR Practices on CoD
4.5.1. Overview
4.5.2. Comprehensive CSR Measures on the CoD
4.5.3. Individual Pillars of Comprehensive CSR Measures
4.5.4. Individual Singular CSR Dimension Measures
4.5.5. Summary Tables and Interim Conclusion
5. Discussion and Future Avenues of Research
5.1. CSR Measurement and Validity Issues
5.2. Debt Measures and Debt Instruments
5.3. Sample Characteristics
6. Conclusion
Objectives and Research Themes
This master's thesis aims to close a documented research gap by conducting a structured literature review to determine the impact of corporate social responsibility (CSR) practices on a company's cost of debt (CoD). The central research question seeks to clarify inconsistent prior findings by holistically analyzing quantitative assessments across 32 qualified studies to provide empirical insight into how CSR engagement influences corporate financing costs.
- Analysis of the relationship between CSR practices and debt financing costs.
- Distinction between CSR performance and CSR disclosure in empirical research.
- Theoretical examination of stakeholder, legitimacy, institutional, and agency theories in the context of debt management.
- Methodological evaluation of quantitative research designs used in financial literature.
- Investigation of the transition from voluntary to mandatory CSR reporting frameworks.
Excerpt from the Book
1. Introduction
The growing recognition of the role corporations play in addressing environmental and social challenges has been on the rise for several years. As businesses are increasingly being held accountable for their environmental and societal influence, the calling for active engagement in CSR issues is louder than ever before. Consequently, companies face a growing demand regarding CSR issues such as sustainability practices, social impact initiatives, ethical governance, and transparent disclosure of these. Apparently, the traditional sole purpose of profit-making and increasing shareholder value is evolving into a multifaceted commitment to diverse stakeholder demands.
CSR awareness and reporting on it have gained a lot of momentum in the last two decades. “[A] 2020 survey identified that 80% of N100 companies worldwide (the top 100 companies by revenue in 52 countries and jurisdictions) now report on sustainability, up by 5% since the last survey in 2017, while the reporting rate has reached 90% or more for the G250 group (the world’s largest 250 companies by revenue) since 2011.” (KPMG, 2020; Zhou, 2022).
While involvement in such activities signals dedication to sustainability and acts as a bridge for stakeholder engagement, the potential benefits, such as reputation enhancement, transparency, and accountability, coexist with challenges. CSR, albeit intuitive in its positive aspects, can also become a burdensome obligation, promoting involuntary operational changes and the risk of camouflaging business practices as something they are not. Against this backdrop, a fundamental question arises: How does CSR engagement affect companies financially? Does it pay off to effectively engage in CSR?
Summary of Chapters
1. Introduction: Outlines the rising importance of environmental and social awareness in the corporate sector and introduces the thesis focus on the financial impact of CSR on the cost of debt.
2. Background Information and Theories: Provides conceptual definitions of sustainability and CSR, and details relevant theories like Stakeholder, Legitimacy, Institutional, and Agency theory to support the research hypothesis.
3. Methodology: Describes the structured literature review (SLR) approach, the criteria for selecting relevant scientific articles, and the quality assurance measures taken during the research process.
4. Literature Review Results: Presents the primary findings from 32 analyzed studies, including data sources, sample characteristics, and evidence regarding the association between CSR practices and the cost of debt.
5. Discussion and Future Avenues of Research: Critically evaluates the findings from the literature review, addresses complexities in measurement, and suggests prospective research areas to further explore the CSR-CoD relationship.
6. Conclusion: Summarizes the thesis, confirms the core hypothesis regarding the negative association between CSR practices and the cost of debt, and evaluates the implications for stakeholders.
Key Words
Corporate Social Responsibility, CSR practices, Cost of Debt, CoD, Environmental Social and Governance, ESG, Literature Review, Structured Literature Review, Sustainability, Corporate Financial Performance, Stakeholder Theory, Debt Financing, Disclosure, Performance, Financial Management
Frequently Asked Questions
What is the primary focus of this thesis?
The thesis focuses on investigating the mathematical relationship between the implementation of corporate social responsibility (CSR) practices and the cost of debt (CoD) for companies, filling a gap in the existing literature.
What are the central thematic fields?
The work explores corporate finance, sustainability reporting, and the application of dominant organizational theories (Stakeholder, Legitimacy, Institutional, and Agency) within the context of corporate debt management.
What is the main research question of the work?
The work seeks to answer: "How do CSR practices impact companies’ cost of debt?" through an analysis of prior academic literature.
Which scientific methodology is applied?
The author employs a structured literature review (SLR) methodology, filtering 32 peer-reviewed studies that meet high-quality academic standards and focus on quantitative statistical analysis.
What is covered in the main part of the thesis?
The main body examines current sustainability terminology, theoretical frameworks, regulatory developments across major economic regions like the USA, EU, and China, and synthesizes empirical evidence on how CSR influences debt costs.
Which keywords define this research?
Key terms include CSR practices, Cost of Debt (CoD), ESG, sustainability reporting, stakeholder theory, and structured literature review.
How is the cost of debt measured in this research?
The thesis utilizes three primary dependent variables: accounting-based CoD calculations, bond yield spreads, and bank loan spreads, noting that these are the most direct determinants for corporate debt instruments.
Why are bank loan spreads and bond yield spreads analyzed differently in the results?
The analysis reveals that while bond yield spreads consistently show a reduction in response to CSR practices, bank loan spreads show inconclusive or insignificant results, suggesting that debt instruments of different structures respond differently to CSR signals.
- Arbeit zitieren
- Luís Eichhorn (Autor:in), 2023, Corporate Social Responsibility Practices. The Cost of Debt, München, GRIN Verlag, https://www.grin.com/document/1432015
