Journal
JOURNAL OF BANKING & FINANCE
Volume 35, Issue 7, Pages 1794-1810Publisher
ELSEVIER
DOI: 10.1016/j.jbankfin.2010.12.002
Keywords
Loan pricing; Corporate social responsibility; Socially responsible investing
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This study examines the link between corporate social responsibility (CSR) and bank debt. Our focus on banks exploits their specialized role as delegated monitors of the firm. Using a sample of 3996 loans to US firms, we find that firms with social responsibility concerns pay between 7 and 18 basis points more than firms that are more responsible. Lenders are more sensitive to CSR concerns in the absence of security. We document a mixed reaction to discretionary CSR investments. Low-quality borrowers that engage in discretionary CSR spending face higher loan spreads and shorter maturities, but lenders are indifferent to CSR investments by high-quality borrowers. (C) 2010 Elsevier B.V. All rights reserved.
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