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Article

18 May 2011

Author:
Beiting Cheng and George Serafeim, Harvard Business School; Ioannis Ioannou, London Business School

[PDF] Corporate Social Responsibility and Access to Finance

In this paper, we investigate whether superior performance on corporate social responsibility (CSR) strategies leads to better access to finance. We hypothesize that better access to finance can be attributed to reduced agency costs, due to enhanced stakeholder engagement through CSR and reduced informational asymmetries, due to increased transparency through non-financial reporting. Using a large cross-section of firms, we show that firms with better CSR performance face significantly lower capital constraints. The results are confirmed using an instrumental variables and a simultaneous equations approach. Finally, we find that the relation is primarily driven by social and environmental performance, rather than corporate governance. [Refers to Thomson Reuters, Bloomberg, J.P. Morgan Chase, Deutsche Bank]