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Is default probability associated with corporate social responsibility?

Author

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  • Ta-Cheng Chang
  • Yun-Chia Yan
  • Li-Chuan Chou

Abstract

The paper applies a compound option-based structural credit risk model to estimate the short-run and forward default probability for a sample of listing companies from Taiwan. We contribute to the literature by linking the relationship between the corporate social responsibility (CSR) rating and the firm's default risk. Our empirical results show that good CSR companies have very low short-term default probability and forward default probability. In terms of regression analyses, we find that there is a negative and significant association between CSR score and forward default probability.

Suggested Citation

  • Ta-Cheng Chang & Yun-Chia Yan & Li-Chuan Chou, 2013. "Is default probability associated with corporate social responsibility?," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 20(4), pages 457-472, December.
    • Handle: RePEc:taf:raaexx:v:20:y:2013:i:4:p:457-472
    DOI: 10.1080/16081625.2013.825228
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    Citations

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    Cited by:

    1. Chien-Ming Huang & Wei Yang & Ren-Qing Zeng, 2020. "Analysis on the Efficiency of Risk Management in the Chinese Listed Companies," Mathematics, MDPI, vol. 8(10), pages 1-13, October.
    2. Meles, Antonio & Salerno, Dario & Sampagnaro, Gabriele & Verdoliva, Vincenzo & Zhang, Jianing, 2023. "The influence of green innovation on default risk: Evidence from Europe," International Review of Economics & Finance, Elsevier, vol. 84(C), pages 692-710.
    3. Lu, Yang-Cheng & Wei, Yu-Chen & Chang, Tsang-Yao, 2015. "The effects and applicability of financial media reports on corporate default ratings," International Review of Economics & Finance, Elsevier, vol. 36(C), pages 69-87.
    4. Ahsan Habib & Mabel D' Costa & Hedy Jiaying Huang & Md. Borhan Uddin Bhuiyan & Li Sun, 2020. "Determinants and consequences of financial distress: review of the empirical literature," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(S1), pages 1023-1075, April.
    5. Daniela Coluccia & Stefano Fontana & Silvia Solimene, 2018. "Does Institutional Context Affect CSR Disclosure? A Study on Eurostoxx 50," Sustainability, MDPI, vol. 10(8), pages 1-20, August.
    6. Hsu, Feng-Jui & Chen, Sheng-Hung, 2021. "US quantitative easing and firm’s default risk: The role of Corporate Social Responsibility (CSR)," The Quarterly Review of Economics and Finance, Elsevier, vol. 80(C), pages 650-664.
    7. Do, Trung K., 2022. "Corporate social responsibility and default risk: International evidence," Finance Research Letters, Elsevier, vol. 44(C).
    8. Yin Shi & Xiaoni Li & Maher Asal, 2023. "Impact of sustainability on financial distress in the air transport industry: the moderating effect of Asia–Pacific," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-23, December.
    9. Pei-Gi Shu & Tsung-Kang Chen & Wen-Jye Hung, 2015. "Audit duration quality and client credit risk," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 22(2), pages 137-162, June.
    10. Jing Jia & Zhongtian Li, 2022. "Corporate Environmental Performance and Financial Distress: Evidence from Australia," Australian Accounting Review, CPA Australia, vol. 32(2), pages 188-200, June.
    11. Lin, K.C. & Dong, Xiaobo, 2018. "Corporate social responsibility engagement of financially distressed firms and their bankruptcy likelihood," Advances in accounting, Elsevier, vol. 43(C), pages 32-45.
    12. Thuy Thi Thu Truong & Jungmu Kim, 2019. "Do Corporate Social Responsibility Activities Reduce Credit Risk? Short and Long-Term Perspectives," Sustainability, MDPI, vol. 11(24), pages 1-16, December.
    13. Mohamad Hassan Shahrour & Isabelle Girerd-Potin & Ollivier Taramasco, 2021. "Corporate social responsibility and firm default risk in the Eurozone: a market-based approach," Post-Print hal-03198467, HAL.

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