The Relationship Between Corporate Social Responsibility And The Cost Of Debt Financing

The goal of corporate investment and financing is to achieve the maximization of the investors’benefits and the minimization of the financing costs. However, the definition of this goal has limitations. It is more precise to say that the goal of the companies is twofold:on the one hand, it should focus on achieving the benefits for the investors; on the other hand, it should make some contributions to the society, take some social responsibilities and safeguard the interests of corporate stakeholders in order to achieve the sustainable development of the company. Debt financing plays an important role in the external financing and in the corporate growth. In the same time, corporate social responsibility has attracted more attention of the scholars and company operators. This article will examine the correlation between the corporate social responsibility and the cost of debt financing, which has significance for the Chinese listed company under the Chinese characteristics institutional environment and will play an important implications in the company policy-making.This thesis used2010-2012the Shanghai and Shenzhen A-share listed companies as the research samples, and then tested and analyzed the relationship between Corporate Social Responsibility and the Costs of Debt Financing. The paper has been divided into six parts:First, it introduced the research background, the research purpose, the significance of the research, the research methods and the framework of the article; the second part is the literature review:with the main research questions of this paper, it reviewed extensive literatures in the cost of debt financing, corporate social responsibility, and the relationship between them; the third part is the theoretical basis of the research:introduced the related concepts of corporate social responsibility and debt financing cost; and based on corporate reputation theory and stakeholder theory, it proposed the hypothesis of the research; the fourth part is the empirical design:this part described the selection of the data and variables, and explained the research methods and model design; the fifth part is empirical and results analysis, mainly using descriptive statistics, correlation analysis, variance analysis, multiple regression analysis and other methods to test the research hypotheses, we can get the results:(1) corporate social responsibility and the cost of debt financing have a negative correlation between each other.(2) Compared to the large-scale company, small-scale company is easier to get lower cost of debt financing by improving corporate social responsibility.(3) Non-state-owned companies and state-holding companies don’t have big difference in reducing the cost of debt financing by improving CSR performance.(4) Compared to the company with the lower asset-liability ratio, the high asset-liability ratio of business is easier to get lower cost of debt financing by improving corporate social responsibility. The last part of the paper, according to the research conclusion, the author raised some recommendation and pointed out the deficiencies of this paper.Through the combination of theoretical analysis and practical literature data empirical research, based on the information disclosed by current annual report of listed companies about social responsibility and the cost of debt financing, using the empirical methods to study on the relationship between the disclosure of corporate social responsibility and the cost of debt financing. The article will fill the gap of this academic research and will enrich the study of CSR. Also, the article proposed that enterprise bear the social responsibility will help reduce the cost of debt financing, especially in small companies and high asset-liability ratio companies. It has certain enlightenment to supervision department, listed companies, creditors, shareholders and other corporate stakeholders.