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Article
Publication date: 3 August 2015

Yuanhui Li and Check Teck Foo

The paper aims to investigate the relationship between social responsibility and equity in China. In the process, the authors utilize data on corporate social responsibility (CSR…

3169

Abstract

Purpose

The paper aims to investigate the relationship between social responsibility and equity in China. In the process, the authors utilize data on corporate social responsibility (CSR) reports (in particular, information disclosure) and equity capital (focusing on cost). The overarching hypothesis may be phrased simply as: is CSR reporting rewarded by the capital market in China?

Design/methodology/approach

The data of 3,012 list corporations in China securities are used and 1,015 CSR report quality scores (Rankins CSR Ratings) are hand-gathered from HEXUN (Web site) and utilized in the process of developing the model; financial and stock market information is obtained from the Wind database and the China Stock Market and Accounting Research database.

Findings

The authors’ results suggest that overall the quality of CSR report is strongly, negatively related with the cost of capital: the higher the quality of social responsibility information disclosure, the lower the cost of equity capital. Most intriguingly, the authors find a sharp contrast between the government-owned corporations (state-owned enterprises) and privately owned, listed corporations. The quality of CSR reporting has a much higher impact in lowering the cost of equity capital for privately owned corporations. In contrasting the results for mandatory versus voluntary CSR disclosure, the quality of CSR reporting for the latter does not have any higher impact in lowering the cost of equity.

Practical implications

Good social responsibility behavior by corporations and their subsequent information disclosure has beneficial financial impacts. In the authors’ research, the authors showed its immediate impact to be in the lowering of the overall corporate cost of equity. In this regard, the authors would recommend that chief executive officers pay more attention to CSR practice and its disclosure. Private firms issuing CSR reports will benefit from much lower financing costs through the capital market.

Originality/value

Due to the structure of capital markets in China, the authors are able to show that CSR reporting of privately owned, listed corporations have much more effective signaling power. On the basis of the authors’ empirical findings in relation to the quality of CSR reporting and its impact on cost of capital, the authors suggest there is greater scope for research which takes a “finance and society” perspective. Based on more extensive research, such a perspective may enable scholars to orientate finance and finance research toward a model of “socio-capitalism”.

Details

Chinese Management Studies, vol. 9 no. 3
Type: Research Article
ISSN: 1750-614X

Keywords

Article
Publication date: 1 April 2003

Georgios I. Zekos

Aim of the present monograph is the economic analysis of the role of MNEs regarding globalisation and digital economy and in parallel there is a reference and examination of some…

86938

Abstract

Aim of the present monograph is the economic analysis of the role of MNEs regarding globalisation and digital economy and in parallel there is a reference and examination of some legal aspects concerning MNEs, cyberspace and e‐commerce as the means of expression of the digital economy. The whole effort of the author is focused on the examination of various aspects of MNEs and their impact upon globalisation and vice versa and how and if we are moving towards a global digital economy.

Details

Managerial Law, vol. 45 no. 1/2
Type: Research Article
ISSN: 0309-0558

Keywords

Article
Publication date: 12 July 2021

Rim Zouari-Hadiji and Yamina Chouaibi

This paper aims to examine the effect of the corporate ethical approach on the cost of equity capital. This study is conducted on a large international sample on behalf of the…

Abstract

Purpose

This paper aims to examine the effect of the corporate ethical approach on the cost of equity capital. This study is conducted on a large international sample on behalf of the world’s most engaged firms from an ethical point of view in 2015.

Design/methodology/approach

The multivariate linear regression model is used to meet the purpose of this study and research hypotheses are also examined using a sample of 80 of most ethical firms in the world during the year 2015. Moreover, three variables (i.e. business ethics, corporate social responsibility and executive compensation based on the achievement of sustainable development goals) are used to reflect the corporate ethical approach and the implied cost of equity capital is used for estimating the cost of equity. In this regard, equity cost estimation is the most appropriate approach to test the effect of business ethics on the cost of financing firms.

Findings

Based on a sample of 80 firms emerging as the world’s most ethical firms in 2015, the results revealed that firms with better ethics scores are significantly associated with a reduced cost of equity capital. This paper also demonstrates that the executive incentive pays that are based on the objectives of sustainable development are able to explain different outcomes regarding the relation between corporate ethical behaviors and the cost of equity. These findings support arguments in the literature that firms with socially responsible practices have a higher valuation and lower risk.

Originality/value

This study provides implications for global regulators and policymakers when setting social reporting standards, suggesting that corporate ethical engagement reduces the cost of equity capital by decreasing the information asymmetry and thereby reducing the firms’ risk. Therefore, the findings may be informative to international managers and investors when considering the effect of business ethics on the firm’s ex-ante cost of equity. In this perspective, the voluntary disclosure of information makes it possible to mitigate the problems of asymmetry of information and conflict of interest between the firm and its main providers of capital, which could reduce the cost of equity.

Details

Journal of Financial Reporting and Accounting, vol. 19 no. 5
Type: Research Article
ISSN: 1985-2517

Keywords

Article
Publication date: 10 June 2022

Arash Arianpoor and Seyyed Sajjad Naeimi Tajdar

This study aims to explore the relationship between firm risk, capital structure, cost of equity capital and social and environmental sustainability during the COVID-19 pandemic…

Abstract

Purpose

This study aims to explore the relationship between firm risk, capital structure, cost of equity capital and social and environmental sustainability during the COVID-19 pandemic for companies listed on Tehran Stock Exchange.

Design/methodology/approach

To this aim, the information about 190 companies in 2014–2020 was retrieved to be analyzed. The total risk and systematic risk were used as the indicators of company risk; the industry-adjusted earnings price ratio (IndEP) and GORDON were used for the cost of equity capital. To measure social sustainability and environmental sustainability, the procedure suggested by Arianpoor and Salehi (2020) was used.

Findings

Underleveraged firms have had a lower total risk during the COVID-19 pandemic, while overleveraged firms have not had a higher risk during this time. In overleveraged firms, using systematic risk has a negative impact on social sustainability during the COVID-19 pandemic. In overleveraged firms, using total risk and systematic risk has a significant negative impact on environmental sustainability in the pandemic. Besides, overleveraged firms have a lower cost of equity capital (IndEP) during COVID-19.

Originality/value

To the best of the authors’ knowledge, no similar study has so far examined the joint impact of COVID-19 and corporate risk on social and environmental sustainability and also the joint impact of COVID-19 and capital structure on the cost of equity. This study contributes to the related literature by providing corporations with insightful post-pandemic directions on capital structure decisions and social and environmental activities. Furthermore, this research and the relevant findings can help understand and develop social responsibility in Iran as a developing country.

Details

Journal of Facilities Management , vol. 22 no. 2
Type: Research Article
ISSN: 1472-5967

Keywords

Book part
Publication date: 1 May 2023

Jui-Chuan Della Chang, Zhi-Yuan Feng, Wen-Gine Wang and Fang-Chi Tsao

Agency problems are more severe for multinational corporations (MNCs) and multinational enterprises compared to their domestic counterparts. As companies develop diversified…

Abstract

Agency problems are more severe for multinational corporations (MNCs) and multinational enterprises compared to their domestic counterparts. As companies develop diversified operations, their managers face more challenges. An incentive compensation structure has been designed to align the benefits of managers with those of shareholders. Additionally, corporate social responsibility (CSR) has become increasingly crucial for companies. MNCs must gain the trust of more investors to improve their corporate reputation and financial performance. CSR enables MNCs with a high sense of social responsibility to expand their investor base, reduce perceived risks, and decrease information asymmetry. Our empirical findings reveal that Taiwanese MNCs can enhance their performance by implementing cash-based compensation and pursuing CSR activities.

Details

Advances in Pacific Basin Business, Economics and Finance
Type: Book
ISBN: 978-1-80382-401-7

Keywords

Abstract

Details

Responsible Investment Around the World: Finance after the Great Reset
Type: Book
ISBN: 978-1-80382-851-0

Article
Publication date: 6 February 2017

Marie-Louise Matthiesen and Astrid Juliane Salzmann

The purpose of this paper is to examine the relationship between corporate social responsibility (CSR) and cost of equity in an international context assessing the moderating…

2258

Abstract

Purpose

The purpose of this paper is to examine the relationship between corporate social responsibility (CSR) and cost of equity in an international context assessing the moderating effect of culture on the relation between CSR and the cost of equity.

Design/methodology/approach

The authors use an international sample of 42 countries, and company-level data from 2002 to 2013, to address cross-country variations in the effects of CSR on cost of equity in different cultural contexts.

Findings

The authors first substantiate previous research and show that the more a company is engaged in CSR, the lower its cost of equity. The authors then find that the relationship between CSR and cost of equity is stronger in countries with lower levels of assertiveness and higher levels of humane orientation and institutional collectivism.

Practical implications

The study advances understanding of how national culture promotes socially and environmentally responsible behavior. The implementation of CSR strategies depends on cultural norms, so companies need to be sensitive to local demands and adjust their CSR approaches accordingly.

Originality/value

The paper highlights the need to study how culture influences the relationship between CSR and cost of equity.

Details

Cross Cultural & Strategic Management, vol. 24 no. 1
Type: Research Article
ISSN: 2059-5794

Keywords

Article
Publication date: 3 May 2016

Julia Puaschunder

Global systemic risks of climate change, overindebtedness in the aftermath of the 2008/2009 World Financial Crisis and the need for pension reform in the wake of an aging western…

Abstract

Purpose

Global systemic risks of climate change, overindebtedness in the aftermath of the 2008/2009 World Financial Crisis and the need for pension reform in the wake of an aging western world population, currently raise attention for intergenerational fairness. Pressing social dilemmas beyond the control of singular nation states call for corporate social activities to back governmental regulation in crisis mitigation. The purpose of this paper is to promote the idea of intergenerational equity in the corporate world.

Design/methodology/approach

Theoretical description.

Findings

In the given literature on global responsible leadership in the corporate sector and contemporary corporate social responsibility (CSR) models, intergenerational equity appears to have been neglected. While the notion of sustainability has been integrated in CSR models, intergenerational equity has hardly been touched on as for being a more legal case for codifying the triple bottom line.

Practical implications

Advocating for integrating intergenerational equity concerns in CSR models in academia and practice holds untapped advantages of economically influential corporate entities, corporate adaptability and independence from voting cycles.

Social implications

Integrating a temporal dimension in contemporary CSR helps imbuing a longer-term perspective into the corporate world alongside advancing tax ethics and global governance crises prevention.

Originality/value

Future research avenues comprise of investigating situational factors influencing intergenerational leadership in the international arena in order to advance the idea of corporations tackling the most pressing contemporary challenges of mankind.

Details

Annals in Social Responsibility, vol. 2 no. 1
Type: Research Article
ISSN: 2056-3515

Keywords

Article
Publication date: 19 November 2018

Ain Hajawiyah, Desi Adhariani and Chaerul Djakman

This paper aims to examine the sequential effect of cost of equity capital and corporate social responsibility (CSR) disclosure with family ownership as a moderating variable.

Abstract

Purpose

This paper aims to examine the sequential effect of cost of equity capital and corporate social responsibility (CSR) disclosure with family ownership as a moderating variable.

Design/methodology/approach

This empirical study examines samples of manufacturing firm in Indonesia using multiple regression analysis.

Findings

Firms with high cost of equity capital in previous years have extensive CSR disclosure level. Further, firms with extensive CSR disclosure get benefit of lower cost of equity capital in the following year. Family ownership weakens the effect of previous years cost of equity capital on CSR disclosure. On the other hand, family ownership does not moderate the effect of CSR disclosure on the cost of equity capital.

Research limitations/implications

This study has limitations in terms of CSR measurement using keywords which may not include overall reporting contents. This study also excludes information in sustainability reports and websites, images and scanned files that may provide additional information about the company’s social and environmental activities. This study is limited in terms of the generalization aspect because it only examines firms in one type of industry in one country over three years’ period.

Originality/value

This study provides empirical evidence on the sequential effect of cost of equity capital and CSR disclosure with family ownership as moderating variable from an emerging market context, which has been rarely explored in the previous research.

Details

Social Responsibility Journal, vol. 15 no. 7
Type: Research Article
ISSN: 1747-1117

Keywords

Article
Publication date: 1 April 1986

The Nature of Business Policy Business policy — or general management — is concerned with the following six major functions:

2052

Abstract

The Nature of Business Policy Business policy — or general management — is concerned with the following six major functions:

Details

Management Decision, vol. 24 no. 4
Type: Research Article
ISSN: 0025-1747

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