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Does corporate social responsibility facilitate credit ratings: Evidence from Rule 144A bonds

Author

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  • Cai, Kelly
  • Zhu, Steven X.
  • Zhu, Hui

Abstract

We investigate how corporate social responsibility (CSR) influences the initial credit rating of Rule 144A bonds. Our findings indicate that socially responsible issuers are rewarded with better initial ratings. This result persists even for each environmental, social, and governance component. We further show that foreign issuers with strong CSR receive more favorable initial ratings than their domestic peers. Additionally, issuers with higher CSR can issue larger amounts at lower borrowing costs. Results from instrumental variables and entropy balance analyses show robustness accounting for endogeneity. Our findings suggest that CSR efforts are recognized and rewarded in the Rule 144A market.

Suggested Citation

  • Cai, Kelly & Zhu, Steven X. & Zhu, Hui, 2025. "Does corporate social responsibility facilitate credit ratings: Evidence from Rule 144A bonds," Finance Research Letters, Elsevier, vol. 76(C).
    • Handle: RePEc:eee:finlet:v:76:y:2025:i:c:s1544612325002181
    DOI: 10.1016/j.frl.2025.106954
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    More about this item

    Keywords

    CSR; Rule 144A bonds; Foreign issuers; Credit ratings; Borrowing costs;
    All these keywords.

    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • K0 - Law and Economics - - General
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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