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An International Perspective on Corporate Social Responsibility, Investor Time Preferences, and Cost of Equity

Author

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  • Breuer, Wolfgang
  • Trauzettel, Till
  • Müller, Torbjörn
  • Salzmann, Astrid

Abstract

For a sample of 25,749 international firm-year observations, we evaluate the relationship between shareholders’ time orientation, firms’ corporate social responsibility (CSR), and the cost of equity capital. We find evidence that patient institutional investors monitor the CSR strategy of the firms in which they invest to the extent that the CSR practices of these firms lower their cost of equity capital. Further analysis indicates that this effect is less pronounced when strong national institutions are in place, making monitoring by patient institutional investors unnecessary. Our results reinforce the idea that CSR can be beneficial by lowering the cost of capital as long as adequate control mechanisms are in place.

Suggested Citation

  • Breuer, Wolfgang & Trauzettel, Till & Müller, Torbjörn & Salzmann, Astrid, 2024. "An International Perspective on Corporate Social Responsibility, Investor Time Preferences, and Cost of Equity," International Business Review, Elsevier, vol. 33(1).
    • Handle: RePEc:eee:iburev:v:33:y:2024:i:1:s096959312300094x
    DOI: 10.1016/j.ibusrev.2023.102194
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    More about this item

    Keywords

    Behavioral finance; Corporate social responsibility; Cost of equity; Cultural finance; Time orientation;
    All these keywords.

    JEL classification:

    • A12 - General Economics and Teaching - - General Economics - - - Relation of Economics to Other Disciplines
    • F30 - International Economics - - International Finance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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