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The Effect of Corporate Social Responsibility and the Executive Compensation on Implicit Cost of Equity: Evidence from French ESG Data

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  • Yamina Chouaibi

    (Department of Accounting and Finance, Faculty of Economics and Management of Sfax, University of Sfax, Sfax 3018, Tunisia)

  • Matteo Rossi

    (Department of Law, Economics, Management and Quantitative Methods (DEMM), University of Sannio, 82100 Benevento, Italy)

  • Ghazi Zouari

    (Department of Accounting and Finance, Faculty of Economics and Management of Sfax, University of Sfax, Sfax 3018, Tunisia)

Abstract

This research aimed to evaluate the effect of corporate social responsibility (CSR) and executive incentive compensation based on the achievement of sustainability goals on the implicit cost of equity. To test the study’s hypotheses, the authors applied linear regressions on panel data using the Thomson Reuters ASSET4 and Thompson Institutional Brokers Earnings Services (I/B/E/S) database of a sample of 154 French ESG firms over the 2015–2020 period. Our results show that CSR activities lower the cost of equity capital; hence, these activities are important to shareholders’ investment and financing decisions. The results have practical implications for investors and other partners interested in the business. Thus, using the implicit cost of equity is a better estimate of shareholder requirements in the context of socially responsible businesses. The results of this work could attract the attention of socially responsible investors and, especially, corporate citizens.

Suggested Citation

  • Yamina Chouaibi & Matteo Rossi & Ghazi Zouari, 2021. "The Effect of Corporate Social Responsibility and the Executive Compensation on Implicit Cost of Equity: Evidence from French ESG Data," Sustainability, MDPI, vol. 13(20), pages 1-17, October.
    • Handle: RePEc:gam:jsusta:v:13:y:2021:i:20:p:11510-:d:659028
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    Cited by:

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    2. Ye Lim Jung & Hyoung Sun Yoo, 2023. "Environmental, social, and governance activities and firm performance: Global evidence and the moderating effect of market competition," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 30(6), pages 2830-2839, November.
    3. Bhakti Agarwal & Rahul Singh Gautam & Pooja Jain & Shailesh Rastogi & Venkata Mrudula Bhimavarapu & Saumya Singh, 2023. "Impact of Environmental, Social, and Governance Activities on the Financial Performance of Indian Health Care Sector Firms: Using Competition as a Moderator," JRFM, MDPI, vol. 16(2), pages 1-11, February.
    4. Dingzu Zhang & Lijuan Pan & Luqi Liu & Huixiang Zeng, 2023. "Impact of executive pay gap on environmental, social, and governance disclosure in China: Is there a strategic choice?," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 30(5), pages 2574-2589, September.
    5. Salihi, Awaisu Adamu & Ibrahim, Haslindar & Baharudin, Dayana Mastura, 2024. "Environmental governance as a driver of green innovation capacity and firm value creation," Innovation and Green Development, Elsevier, vol. 3(2).
    6. Xiaofang Chen & Yilei Li & Yu Hu & Guangyu Yu, 2023. "The Impact of General Manager’s Responsible Leadership and Executive Compensation Incentive on Enterprise ESG Performance," Sustainability, MDPI, vol. 15(15), pages 1-16, August.
    7. Ge Ge & Xiang Xiao & Zhenzhu Li & Qinghui Dai, 2022. "Does ESG Performance Promote High-Quality Development of Enterprises in China? The Mediating Role of Innovation Input," Sustainability, MDPI, vol. 14(7), pages 1-24, March.

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