Corporate Social Responsibility and Credit Risk

We study the effects of corporate social responsibility on credit risk for U.S. and European firms over the period 2003 to 2018. Differentiating between the various facets of corporate social responsibility shows that only environmental aspects reduce different measures of credit risk for U.S. firms, whereas both environmental and social aspects do so for European firms. Surprisingly, we find that credit ratings do not reflect these credit-risk reducing effects of corporate social responsibility. Our results are robust against different estimation methods.