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The Impact of Corporate Social Responsibility on Corporate Financial Performance and Credit Ratings in Japan

In: Risks Related to Environmental, Social and Governmental Issues (ESG)

Author

Listed:
  • Frank J. Fabozzi

    (EDHEC Business School)

  • Peck Wah Ng

    (EDHEC Business School)

  • Diana E. Tunaru

    (University of Kent)

Abstract

We investigate the impact of companies’ sustainability eff orts on their corporate financial performance (CFP) and credit ratings in Japan, based on a new proxy for corporate social responsibility (CSR)—Sustainalytics’ quantitative Environment, Social and Governance (ESG) ratings. We find weak evidence of a negative impact of ESG scores (on an aggregated basis and disaggregated basis) on several accounting measures of CFP. Our quantile regression results reveal a nonlinear pattern across the quantiles, with CSR effects intensifying at the extremal quantiles. However, we find a weak positive relationship between ESG and stock market-based measures, as well as between ESG and credit ratings. Our findings suggest that investors, credit rating agencies (CRAs) and regulators should differentiate between the three types of ESG screening as they interact and contribute in their specific way to the aggregate ESG effect.

Suggested Citation

  • Frank J. Fabozzi & Peck Wah Ng & Diana E. Tunaru, 2022. "The Impact of Corporate Social Responsibility on Corporate Financial Performance and Credit Ratings in Japan," Springer Books, in: Marielle de Jong & Dan diBartolomeo (ed.), Risks Related to Environmental, Social and Governmental Issues (ESG), pages 3-19, Springer.
    • Handle: RePEc:spr:sprchp:978-3-031-18227-3_2
    DOI: 10.1007/978-3-031-18227-3_2
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    Cited by:

    1. Samuel Leroy Cabrera-Luján & David Josías Sánchez-Lima & Segundo Alberto Guevara-Flores & Dany Yudet Millones-Liza & Elizabeth Emperatriz García-Salirrosas & Miluska Villar-Guevara, 2023. "Impact of Corporate Social Responsibility, Business Ethics and Corporate Reputation on the Retention of Users of Third-Sector Institutions," Sustainability, MDPI, vol. 15(3), pages 1-18, January.
    2. Emmanuel Jeffrey Dzage & György Norbert Szabados, 2024. "The Relationship of Corporate Social Responsibility with Business Performance—A Bibliometric Literature Review," Sustainability, MDPI, vol. 16(7), pages 1-25, March.
    3. Shan Xue & Yuehua Xu & Honghui Chen, 2024. "Corporate social performance feedback and corporate social responsibility decoupling in China: The salience of legitimacy and/or efficiency," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 31(4), pages 3164-3180, July.

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