Corporate Social Responsibility and the Cost of Debt Financing

This study examines the link between corporate social responsibility and bank debt. Our focus on banks exploits their specialized role as quasi-insider delegated monitors. We find that firms with the worst social responsibility scores pay higher spreads (16 bps) but firms with average or good social scores benefit very little from increasing them further. The modest premium charged the worst firms together with the absence of a payoff for the best firms suggest that banks do not regard corporate social responsibility as significantly value enhancing or risk reducing