Mapping the Literature Trends of Corporate Social Responsibility and Cost of Capital: A Systematic Literature Review

Abstract

Corporate social responsibility (CSR) has emerged as a strategic framework for enhancing corporate reputation, mitigating financial risks and improving access to capital. However, empirical evidence on its financial implications remains inconsistent, highlighting notable gaps in understanding the relationship between CSR practices and the cost of capital (COC). This systematic literature review (SLR) analyses 104 Scopus-indexed studies published between 2010 and 2023 to examine this relationship. The findings suggest that CSR initiatives contribute to improved financial performance, enhance firm reputation, and reduce capital costs. Proactive CSR strategies not only align with ethical imperatives but also deliver long-term value by fostering stakeholder confidence and mitigating financing risks. The review emphasises the critical role of CSR, particularly in environmental compliance, as an integral component of financial strategy and risk management. It provides evidence that CSR initiatives enhance investment efficiency and lower financing costs, offering a refined perspective on their financial significance. Moreover, it paves the way for future research on global reporting standards and evaluation methods. These insights are highly relevant to policymakers, regulators, investors, creditors, and practitioners aiming to integrate sustainability with economic goals while reducing the COC.