Does Corporate Social Responsibility Facilitate Public Debt Financing?

Abstract

We find that firms with stronger corporate social responsibility (CSR) performance have a larger share of public debt in their total debt, particularly when they are subject to higher information asymmetry or greater financial constraints. Moreover, the CSR effect on public debt is weaker for firms in sin industries or low-trust regions where CSR is less likely to be viewed as a genuine commitment. Utilizing the BP oil spill event as a shock to investors’ CSR awareness, we document that the positive effect of CSR on public debt is more evident after the shock, particularly for firms outside the oil and gas industries.