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Corporate social responsibility disclosure and debt financing

Author

Listed:
  • Amal Hamrouni

    (GEREM - Groupe d 'Etudes et de Recherche en Economie et Management - UPVD - Université de Perpignan Via Domitia - CNRS - Centre National de la Recherche Scientifique)

  • Rim Boussaada

    (UJ - Université de Jendouba)

  • Nadia Ben Farhat Toumi

    (IUT de Cannes)

Abstract

Purpose The purpose of this paper is to examine how corporate social responsibility (CSR) reporting influences leverage ratios. In particular, this paper aims to determine whether firms with higher CSR disclosure scores have better access to debt financing. Design/methodology/approach This paper uses a panel data analysis of non-financial French firms listed on the Euronext Paris Stock Exchange and members of the SBF 120 index from 2010 to 2015. The environmental, social and governance (ESG) disclosure scores that are collected from the Bloomberg database are used as a proxy for the extent of ESG information disclosures by French companies. Findings The empirical results demonstrate that leverage ratios are positively related to CSR disclosure scores. In addition, the results show that the levels of long-term and short-term debt increase with the disclosure of ESG information, thus suggesting that CSR disclosures play a significant role in reducing information asymmetry and improving transparency around companies' ESG activities. This finding meets the lenders' expectations in terms of extrafinancial information and attracts debt financing sources. Research limitations/implications The research is based only on the quantity of the ESG information disclosed by French companies and does not account for the quality of the CSR disclosures. The empirical model omits some control variables (e.g. the nature of the industry, the external business conditions and the age of the firm). The results should not be generalized, since the sample was based on large French companies for 2010–2015. Practical implications France is a highly regulated context that places considerable pressure on French firms in terms of CSR policies. The French Parliament has adopted several laws requiring transparency in the environmental, social, and corporate governance policies of French firms. In this context, firms often regard CSR policies as constraints rather than opportunities. This study highlights the benefits that result from transparent CSR practices. More precisely, it provides evidence that the high disclosure of ESG information is a pull factor for credit providers. Originality/value This study extends the scope of previous studies by examining the value and relevance of CSR disclosures in financing decisions. More precisely, it focuses on the relatively little explored relationship between the extent of CSR disclosures and access to debt financing. This paper demonstrates how each category of CSR disclosure information (e.g. social, environmental and governance) affects access to debt financing. Moreover, this study focuses on the rather interesting empirical setting of France, which is characterized by its highly developed legal reforms in terms of CSR. Achieving a better understanding of the effects of ESG information is useful for corporate managers desiring to meet lenders' expectations and attract debt financing sources.

Suggested Citation

  • Amal Hamrouni & Rim Boussaada & Nadia Ben Farhat Toumi, 2019. "Corporate social responsibility disclosure and debt financing," Post-Print hal-02521353, HAL.
  • Handle: RePEc:hal:journl:hal-02521353
    DOI: 10.1108/JAAR-01-2018-0020
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    Citations

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    Cited by:

    1. Wanyi Chen & Liguang Zhang & Pinyan Jiang & Fanli Meng & Qianyi Sun, 2022. "Can digital transformation improve the information environment of the capital market? Evidence from the analysts' prediction behaviour," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(2), pages 2543-2578, June.
    2. María Consuelo Pucheta‐Martínez & Inmaculada Bel‐Oms & Isabel Gallego‐Álvarez, 2023. "Corporate social responsibility reporting and capital structure: Does board gender diversity mind in such association?," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 30(4), pages 1588-1600, July.
    3. Barbara Grabinska & Dorota Kedzior & Marcin Kedzior & Konrad Grabinski, 2021. "The Impact of CSR on the Capital Structure of High-Tech Companies in Poland," Sustainability, MDPI, vol. 13(10), pages 1-20, May.
    4. Nana Liu & Chuanzhe Liu & Quan Guo & Bowen Da & Linna Guan & Huiying Chen, 2019. "Corporate Social Responsibility and Financial Performance: A Quantile Regression Approach," Sustainability, MDPI, vol. 11(13), pages 1-22, July.
    5. Tang, Hua & Xiong, Langyu & Peng, Ru, 2024. "The mediating role of investor confidence on ESG performance and firm value: Evidence from Chinese listed firms," Finance Research Letters, Elsevier, vol. 61(C).
    6. Karen Gloria Vargas‐Santander & Susana Álvarez‐Diez & Samuel Baixauli‐Soler & María Belda‐Ruiz, 2023. "Corporate social responsibility and financial performance: Does country sustainability matter?," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 30(6), pages 3075-3094, November.
    7. Abdullah Jihad Rabaya & Norman Mohd Saleh, 2022. "The moderating effect of IR framework adoption on the relationship between environmental, social, and governance (ESG) disclosure and a firm's competitive advantage," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 24(2), pages 2037-2055, February.
    8. Kofi Mintah Oware & T. Mallikarjunappa & A Praveena, 2023. "Corporate Social Responsibility (CSR) Expenditure and Debt Financing. Do the Unspent CSR Expenditure and Firm Age of Public Sector Enterprises in India Matter?," Public Organization Review, Springer, vol. 23(4), pages 1591-1610, December.
    9. Khan, Muhammad Arif, 2022. "ESG disclosure and Firm performance: A bibliometric and meta analysis," Research in International Business and Finance, Elsevier, vol. 61(C).
    10. Tan, Xiujie & Liu, Gufeng & Cheng, Si, 2024. "How does ESG performance affect green transformation of resource-based enterprises: Evidence from Chinese listed enterprises," Resources Policy, Elsevier, vol. 89(C).
    11. Bax, Karoline & Sahin, Özge & Czado, Claudia & Paterlini, Sandra, 2023. "ESG, risk, and (tail) dependence," International Review of Financial Analysis, Elsevier, vol. 87(C).
    12. JaeYeon Sim & Kyungmyung Jang, 2023. "Blockchain innovation and firm’s financial performance: patent analysis based on firm-level information," Applied Economics, Taylor & Francis Journals, vol. 55(60), pages 7178-7193, December.
    13. Kong, Wen, 2023. "The impact of ESG performance on debt financing costs: Evidence from Chinese family business," Finance Research Letters, Elsevier, vol. 55(PB).
    14. Elena Vetoshkina & Anna Ivanovskaya & Elvira Kazykhanova & Natalia Semenikhina, 2020. "Analysis of Impact of Non-financial Information Disclosure on Capitalization of Russian Oil and Gas Sector Companies," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(5), pages 267-274, October.
    15. Kang, Martin & Miller, Andrew & Jang, Kyungmyung & Kim, Horim, 2022. "Firm performance and information security technology intellectual property," Technological Forecasting and Social Change, Elsevier, vol. 181(C).

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