TY - JOUR
T1 - Corporate social responsibility and cost of capital
T2 - The moderating role of policy intervention
AU - Prasad, Krishna
AU - Kumar, Satish
AU - Devji, Shridev
AU - Lim, Weng Marc
AU - Prabhu, Nandan
AU - Moodbidri, Sudhir
N1 - Funding Information:
The authors acknowledge and thank the Indian Council of Social Science Research (ICSSR) , New Delhi, for their financial support for this research through the Impactful Policy Research in Social Science (IMPRESS) initiative.
Publisher Copyright:
© 2022 Elsevier B.V.
PY - 2022/4
Y1 - 2022/4
N2 - Corporate social responsibility (CSR) and cost of capital (COC) have been investigated in the past but not in tandem with policy intervention. This paper examines the impact of CSR on COC together with the policy intervention of mandatory CSR. This study uses a sample of 512 nonfinancial firms in India as a case and the costs of debt (COD) and equity (COE) as measures for COC. The findings indicate that (1) higher CSR performance decreases COD and increases COE and that (2) mandatory CSR legislation moderates their relationships such that it increases COD and COE. Therefore, consistent with signaling theory, we conclude that mandatory CSR spending signals a loss of discretionary power of CSR spending and signal intentionality and an implicit increase in agency costs.
AB - Corporate social responsibility (CSR) and cost of capital (COC) have been investigated in the past but not in tandem with policy intervention. This paper examines the impact of CSR on COC together with the policy intervention of mandatory CSR. This study uses a sample of 512 nonfinancial firms in India as a case and the costs of debt (COD) and equity (COE) as measures for COC. The findings indicate that (1) higher CSR performance decreases COD and increases COE and that (2) mandatory CSR legislation moderates their relationships such that it increases COD and COE. Therefore, consistent with signaling theory, we conclude that mandatory CSR spending signals a loss of discretionary power of CSR spending and signal intentionality and an implicit increase in agency costs.
UR - http://www.scopus.com/inward/record.url?scp=85124380328&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=85124380328&partnerID=8YFLogxK
U2 - 10.1016/j.ribaf.2022.101620
DO - 10.1016/j.ribaf.2022.101620
M3 - Article
AN - SCOPUS:85124380328
VL - 60
JO - Research in International Business and Finance
JF - Research in International Business and Finance
SN - 0275-5319
M1 - 101620
ER -
