Corporate Social Responsibility and Financial Risk Management
A special issue of Sustainability (ISSN 2071-1050). This special issue belongs to the section "Sustainable Management".
Deadline for manuscript submissions: closed (30 November 2020) | Viewed by 12792
Special Issue Editors
Interests: Corporate Social Responsibility, Corporate Governance, Business ethics, Ethical instruction
Interests: Corporate Social Responsibility, Corporate Governance, Organizations
Special Issue Information
Dear Colleagues,
The financial crisis of 2008 showed that financial information did not adequately reveal risks. Users, shareholders, and creditors require more information about risks, and disclosure is moving in this direction. Risk assessment may be different between shareholders and creditors. Risks can be related to social and environmental conflicts, and these can affect long-term sustainability, increase debt cost, and cause financial distress. Otherwise, doing well by doing good in environmental and social issues could reduce debt cost. In this sense, debt markets’ perception of financial risk could be affected by CSR policies.
For creditors, CSR could be considered as a signal of how the firm manages its financial risk. First, CSR activities could generate moral capital or goodwill that minimizes default risk by decreasing debt cost. Second, the reduction of social conflicts or environmental risk favors the long-term sustainability of firms and ensures credit rating (Hsu and Chen, 2015). Today, credit rating agencies and financial institutions are demanded to assess long-term risk (Andrikopoulos et al, 2014). Third, the increase of CSR commitments could be seen by stakeholders as a signal of doing well and improve the relationship between firms and key stakeholders, and this could have an effect on financial performance indicators (Chollet and Sandwidi, 2018). Fourth, CSR policies are conservative, thus decreasing the risk of loss from investments in high-risk projects or underinvestment in low-risk accrual to creditors. Credit decisions take into account financial risk but ESG factors, too. Some major European banks have to justify their credit decisions on the basis of ESG performance, and the cost will be related to the perceived risks.
In this context, CSR commitment could suppose a reduction of financial risk reflected in a decrease of marginal cost of debt, the cost of debt (Jung et al., 2018) or access to debt financing (La Rosa et al. 2018), and negative CSR could increase the cost of financing (Mishra and Modi, 2013).
In addition, the impact of board characteristics such as the presence of women could be considered. Women are more prone to CSR and more risk-averse than men. Their presence may have an impact on reducing financial distress. In addition, CSR assurance could improve the confidence and reliability in CSR policies developed (Maroun, 2018; Sethi et al., 2017). Likewise, the legal or institutional context of the firm can also have an impact on the relationship between CSR and the cost of financing (Benlemlih and Girerd-Potin, 2017).
Suggested topics include:
- Environmental and social strategies and the characteristics of corporate governance boards and their impact on financial risk;
- Good governance, environmental, and social practices and financial risk;
- Impact of positive and negative CSR on financial risk;
- Impact of CSR in financial distress and solvency situations/
- CSR assurance and financial risk;
- Relationship between financial risk and the organization's ability to create value;
- How CSR relates to the continued availability, quality, and affordability of relevant capital in the short, medium, and long term (cost of debt or marginal cost of debt).
References
Andrikopoulos, A., Samitas, A, and Bekiaris, M (2014) Corporate social responsibility reporting in financial institutions: Evidence from Euronext, Research in International Business and Finance, 32: 27-35
Benlemlih, M, Girerd‐Potin, I. (2017) Corporate social responsibility and firm financial risk reduction: On the moderating role of the legal environment. Journal of Business Financing and Accounting.; 44: 1137– 1166. https://doi.org/10.1111/jbfa.12251
Chollet, P, and Sandwidi, B.W. (2018) CSR engagement and financial risk: A virtuous circle? International evidence, Global Finance Journal, 38: 65-81.
Hsu, F. and Chen, Y. (2015), "Is a firm’s financial risk associated with corporate social responsibility?", Management Decision, 53 (9): 2175-2199. https://doi.org/10.1108/MD-02-2015-0047
Jung, J., Herbohn, K. & Clarkson, P. (2018) Carbon Risk, Carbon Risk Awareness and the Cost of Debt Financing, Journal of Business Ethics 150: 1151. https://doi.org/10.1007/s10551-016-3207-6
La Rosa, F., Liberatore, G., Mazzi, F. and Terzani, S. (2018) The impact of corporate social performance on the cost of debt and access to debt financing for listed European non-financial firms, European Management Journal, 36 (4): 519-529,
Maroun, W. (2018) A Conceptual Model for Understanding Corporate Social Responsibility Assurance Practice. Journal of Business Ethics. https://doi.org/10.1007/s10551-018-3909-z
Mishra, S. & Modi, S.B. (2013) Positive and Negative Corporate Social Responsibility, Financial Leverage, and Idiosyncratic Risk, Journal of Business Ethics, 117(2): 431. https://doi.org/10.1007/s10551-012-1526-9
Sethi, S.P., Martell, T.F. & Demir M. (2017), Enhancing the Role and Effectiveness of Corporate Social Responsibility (CSR) Reports: The Missing Element of Content Verification and Integrity Assurance, Journal of Business Ethics 144 (1): 59-82. https://doi.org/10.1007/s10551-015-2862-3.
Prof. Dr. María Victoria López
Prof. Dr. Jesús Mauricio Flórez-Parra
Guest Editors
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Keywords
- positive CSR
- negative CSR
- environment performance
- social performance
- financial risk
- CSR assurance
- board diversity
- good governance practices
- cost of debt
- financing access
