Resumo

The impacts of global warming received considerable attention in the last decades. CSR initiatives amplify the financial relevance of the debt market (Gracia & Siregar, 2021; Banga, 2019, Liang & Renneboog, 2017). Some studies posit that CSR activities reduce the cost of debt as CSR disclosure can enhance companies’ reputations and decrease agency costs (Houqe et al., 2020; La Rosa et al., 2018). Nevertheless, controversial results about the impact of CSR activities on the cost of debt request more investigation into this topic (Eliwa et al., 2021; Gracia & Siregar, 2021).

Do companies with superior CSR practices experience a greater reward in terms of a lower cost of debt when situated in countries with higher Worldwide Governance Indicators (WGI)? Firstly, this study provides insights into how CSR engagement impacts the cost of debt based on a broad international sample. Secondly, the research shows evidence of how the WGI moderates the relationship between CSR and the cost of debt. Thirdly, the study investigates the relationship between CSR measures and the cost of debt using two different proxies: interest expense ratio and credit rating.

The literature suggests that CSR commitments decrease risks and improve a firm´s reputation and creditworthiness (Gracia & Siregar, 2021), lowering capital constraints and the cost of debt (Cheng & Serafeim, 2010; Houqe et al., 2020). However, regulations and institutionalized norms of the country can enhance or inhibit CSR activities (Campbell, 2007), as CSR rules align with institutional goals (Jackson & Apostolakou, 2010) within a broader social context. For instance, companies located in countries with lower WGI are less committed to sustainable-related matters (Stellner et al., 2015).

To evaluate the 1º hypothesis: 〖COD〗_it=β_0+β_1 〖ESG〗_(it-1)+β_2 〖Size〗_it+β_3 〖Leverage〗_it+〖β_4 ROA〗_it+〖β_5 Coverage〗_it+〖β_6 Margin〗_it+〖β_7 Beta〗_it+〖β_8 Capint〗_it+〖β_9 MTB〗_it+δ_t+γ_s+θ_j+ε_(it ) (1) To evaluate the 2º hypothesis: the moderation effect of WGI on the relationship between ESG and the Cost of Debt: 〖COD〗_it=β_B0+β_B1 〖ESG〗_(it-1)+β_B2 〖WGI〗_(it-1)+ β_B3 〖ESG〗_(it-1)*〖WGI〗_(it-1 )+β_B4 〖Size〗_it+〖β_B5 Coverage〗_it+〖β_B6 Margin〗_it+〖β_B7 Leverage〗_it+〖β_B8 Capint〗_it+〖β_B9 Beta〗_it+〖β_B10 ROA〗_it+〖β_B11 MTB〗_it+δ_Ct+γ_Cs+θ_Cj+ ε_Cit

Our findings show that a firm´s CSR practices contribute to a reduction in the cost of debt. Notably, the impact is positively and statistically significant when examining credit rating. We also reveal newsworthy findings regarding World Governance Indicators (WGI). Our results demonstrate that the interaction term influences the relationship between the ESG aggregated scores, credit rating, and interest expense ratio as proxies of the cost of debt. These outcomes corroborate previous studies (Attig et al., 2013; La Rosa et al., 2018), confirming the relevance of non-financial information.

The results reveal that increased CSR activities contribute to lower the cost of debt. Our findings also show that companies enhance the benefits from their CSR-related efforts within countries with higher WGI. This emphasizes the conclusion that investment in CSR as a moral capital requires not only effort by companies to create valuable resources and stakeholders that reward sustainable initiatives but also countries that recognize the relevance of this scope (Stellner et al., 2015). Therefore, CSR engagement translates into economic advantages, mitigating firms’ credit risks.

Attig, N., El Ghoul, S., Guedhami, O., & Suh, J. (2013a). Corporate Social Responsibility and Credit Ratings. Journal of Business Ethics, 117(4), 679–694. https://doi.org/10.1007/s10551-013-1714-2 La Rosa, F., Liberatore, G., Mazzi, F., & Terzani, S. (2018). The impact of corporate social performance on the cost of debt and access to debt financing for listed European non-financial firms. European Management Journal, 36(4), 519–529. https://doi.org/10.1016/j.emj.2017.09.007 Stellner, C., Klein, C., & Zwergel, B. (2015). Corporate social responsibility and Eurozone corporate bonds: The moderati