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      Do corporate social responsibility ratings affect credit default swap spreads?

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          Abstract

          We examine the impact of a corporate social responsibility (CSR) rating announcement on the credit default swap (CDS) spreads of European firms. Our results indicate that a CSR rating upgrade leads to an immediate and significant decrease in CDS spreads of rated firms. In contrast, CSR rating downgrades do not have a significant immediate impact on the CDS market. Additionally, better CSR ratings, in terms of both the overall score and the scores for the three main CSR pillars (economic, environmental, and social), lead to lower CDS spreads. Therefore, we document that the CSR rating is a measure of CSR performance that affects market CDS prices. Our findings are consistent with the risk mitigation view, highlighting the benefits derived from CSR commitment. Consequently, CSR engagement can function as a tool for improving firm's creditworthiness. This result may provide an incentive to pay more attention to CSR in managerial, regulatory, and investment decisions.

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          Most cited references43

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          Corporate social responsibility and access to finance

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            Does corporate social responsibility affect the cost of capital?

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              An Introduction to Varieties of Capitalism

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                Author and article information

                Contributors
                Journal
                Corporate Social Responsibility and Environmental Management
                Corp Soc Responsibility Env
                Wiley
                1535-3958
                1535-3966
                May 2019
                December 27 2018
                May 2019
                : 26
                : 3
                : 644-652
                Affiliations
                [1 ] Department of Business Administration University of Calabria Rende CS Italy
                Article
                10.1002/csr.1709
                ef0a4b1b-c757-4930-830a-3438700247e7
                © 2019

                http://onlinelibrary.wiley.com/termsAndConditions#vor

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