Corporate Social Responsibility and the Cost of Equity Capital: The Stage of Economic Development and Legal System Perspectives

• Main Authors: Hui-TingChang, 張惠婷
• Other Authors: Ming-Long Wang
• Format: Others
• Language: en_US
• Published: 2014
• Online Access: http://ndltd.ncl.edu.tw/handle/39271685391184826568

碩士 === 國立成功大學 === 財務金融研究所 === 102 === In this paper, we examine the effects of corporate social responsibility (CSR) on the cost of equity capital under different stages of economic development and legal systems. Using a global sample of 11,903 firm-year observations covering 35 countries from 2002 to 2012, the results show a positive relationship between CSR and the cost of equity capital. However, we find that, firms with better CSR performance in developed countries enjoy a greater reduction in their cost of equity capital compared to those in developing countries. Moreover, in terms of legal systems, which could limit the effectiveness of disclosure, we find significant evidence that firms that operate in countries with systems based on common law have a lower cost of equity capital than those with systems based on civil law. Overall, our results suggest that, since strategic CSR is perceived differently by managers across countries and cultures, the economic, legal and regulatory environments have significant influences on the effect that CSR policies have on the cost of equity capital.