Do Corporate Social Responsibility Activities Reduce Credit Risk? Short and Long-Term Perspectives
Abstract
:1. Introduction
2. Theoretical Background and Hypotheses
3. Data
3.1. The Slope of Credit Default Swaps
3.2. Corporate Social Responsibility
3.3. Control Variables
- Leverage (LEV): Leverage ratio is defined as follows:
- Volatility (IV or HV): We use the implied volatility (IV) of at-the-money put options with a maturity of 30 days, which is collected from OptionMetrics [18], as a proxy for the expected stock volatility. We also use the annualized standard deviation of returns in the previous 250 trading days as the historical volatility (HV) [17]. Daily stock returns are collected from the Center for Research in Security prices (CRSP). Han and Zhou [18] prove that a higher volatility increases the CDS level (i.e., the probability of default), with stronger effect for CDS contract with longer maturity. Thus, we expect a positive relationship between stock volatility and the slope of CDS spreads.
- Level of CDS spreads (CDS): The level of CDS spreads may affect the slope of CDS spreads. We use the level of five-year CDS spread as a control variable because a five-year CDS spread is more liquid than other maturities.
- Return on Assets (ROA): We calculate monthly return on assets as income before extraordinary items divided by the previous quarter’s total assets, as provided by COMPUSTAT. Income is taken from the most recent quarter that reported before the end of month .
4. Methodology
5. Empirical Results
5.1. Summary Statistics
5.2. Fama-MacBeth Regressions
6. Conclusions
Author Contributions
Funding
Acknowledgments
Conflicts of Interest
Appendix A
Model | CSR | CSR_COM | CSR_DIV | CSR_EMP | CSR_ENV | CSR_HUM | CSR_PRO |
---|---|---|---|---|---|---|---|
(I) | (II) | (III) | (IV) | (V) | (VI) | (VII) | |
Panel A: 1-Year CDS Spreads | |||||||
Intercept | −71.379 *** | −72.869 *** | −68.811 *** | −72.658 *** | −71.862 *** | −74.359 *** | −72.311 *** |
(−3.33) | (−3.42) | (−3.31) | (−3.37) | (−3.36) | (−3.48) | (−3.43) | |
CSR | −1.081 *** | −2.227 *** | −2.768 *** | −2.722 *** | −0.837 | 3.426** | 1.052 |
(−5.24) | (−5.07) | (−6.77) | (−4.56) | (−1.51) | (2.18) | (1.42) | |
LEV | 0.853 *** | 0.873 *** | 0.851 *** | 0.875 *** | 0.873 *** | 0.888 *** | 0.893 *** |
(7.86) | (8.05) | (7.40) | (8.04) | (8.08) | (8.36) | (8.58) | |
IV | 3.347 *** | 3.361 *** | 3.299 *** | 3.350 *** | 3.348 *** | 3.386 *** | 3.338 *** |
(5.92) | (5.98) | (5.95) | (5.93) | (5.95) | (6.00) | (6.00) | |
ROA | −5.904 *** | −6.052 *** | −6.025 *** | −6.071 *** | −6.030 *** | −6.019 *** | −6.120 *** |
(−7.16) | (−7.68) | (−6.97) | (−7.39) | (−7.49) | (−8.32) | (−8.04) | |
DEPTH | −3.473 *** | −3.492 *** | −3.255 *** | −3.561 *** | −3.555 *** | −3.523 *** | −3.575 *** |
(−4.70) | (−4.64) | (−4.34) | (−4.76) | (−4.71) | (−4.63) | (−4.70) | |
Adj.R2 | 0.460 *** | 0.455 *** | 0.463 *** | 0.458 *** | 0.457 *** | 0.458 *** | 0.457 *** |
(21.80) | (22.17) | (22.88) | (21.94) | (21.98) | (23.00) | (22.55) | |
Panel B: 5-year CDS levels | |||||||
Intercept | −52.09 | −55.812* | −46.612 | −55.999 * | −53.994 * | −58.789 * | −54.862 * |
(−1.59) | (−1.74) | (−1.51) | (−1.70) | (−1.66) | (−1.83) | (−1.75) | |
CSR | −2.163 *** | −5.611 *** | −6.349 *** | −5.028 *** | −2.024 * | 7.143 *** | 4.206 *** |
(−5.23) | (−4.58) | (−5.35) | (−6.83) | (−1.78) | (4.03) | (5.73) | |
LEV | 1.469 *** | 1.499 *** | 1.471 *** | 1.505 *** | 1.509 *** | 1.534 *** | 1.547 *** |
(7.04) | (7.23) | (6.92) | (7.19) | (7.23) | (7.38) | (7.57) | |
IV | 4.157 *** | 4.208 *** | 4.027 *** | 4.202 *** | 4.184 *** | 4.250 *** | 4.156 *** |
(5.03) | (5.13) | (5.08) | (5.06) | (5.06) | (5.14) | (5.14) | |
ROA | −9.213 *** | −9.546 *** | −9.363 *** | −9.476 *** | −9.464 *** | −9.583 *** | −9.700 *** |
(−12.43) | (−13.81) | (−11.73) | (−13.58) | (−13.43) | (−15.54) | (−14.86) | |
DEPTH | −4.480 *** | −4.488 *** | −3.970 *** | −4.723 *** | −4.680 *** | −4.683 *** | −4.585 *** |
(−5.08) | (−5.06) | (−4.33) | (−5.33) | (−5.10) | (−5.06) | (−4.98) | |
Adj.R2 | 0.482 *** | 0.472 *** | 0.490 *** | 0.476 *** | 0.474 *** | 0.472 *** | 0.472 *** |
(34.60) | (36.54) | (39.41) | (35.76) | (36.01) | (40.89) | (38.99) | |
Panel C: 10-year CDS levels | |||||||
Intercept | −45.849 | −50.037 | −39.135 | −50.389 | −48.284 | −53.418 | −48.791 |
(−1.28) | (−1.42) | (−1.17) | (−1.40) | (−1.36) | (−1.52) | (−1.43) | |
CSR | −2.420 *** | −6.338 *** | −7.175 *** | −5.744 *** | −2.258 * | 8.125 *** | 5.142 *** |
(−5.25) | (−4.52) | (−5.32) | (−6.80) | (−1.88) | (4.35) | (6.10) | |
LEV | 1.602 *** | 1.635 *** | 1.606 *** | 1.639 *** | 1.647 *** | 1.674 *** | 1.690 *** |
(7.07) | (7.28) | (6.98) | (7.23) | (7.27) | (7.43) | (7.62) | |
IV | 4.555 *** | 4.614 *** | 4.394 *** | 4.613 *** | 4.593 *** | 4.663 *** | 4.553 *** |
(5.01) | (5.11) | (5.07) | (5.04) | (5.04) | (5.12) | (5.13) | |
ROA | −9.933 *** | −10.317 *** | −10.086 *** | −10.197 *** | −10.232 *** | −10.340 *** | −10.479 *** |
(−12.16) | (−13.50) | (−11.46) | (−13.61) | (−13.13) | (−15.54) | (−14.61) | |
DEPTH | −3.881 *** | −3.878 *** | −3.302 *** | −4.142 *** | −4.095 *** | −4.091 *** | −3.963 *** |
(−6.39) | (−6.38) | (−4.88) | (−7.09) | (−6.51) | (−6.58) | (−6.28) | |
Adj.R2 | 0.469 *** | 0.459 *** | 0.478 *** | 0.464 *** | 0.460 *** | 0.459 *** | 0.459 *** |
(31.12) | (31.89) | (34.83) | (31.58) | (31.41) | (34.09) | (33.20) |
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Panel A: Descriptive Statistics for Levels of CDS Spreads and CDS Slope | |||||||
Mean | Standard Deviation | Min | Max | ||||
1-year | 97.43 | 128.95 | 4.33 | 1081.19 | |||
2-year | 118.25 | 146.89 | 6.89 | 1153.13 | |||
3-year | 138.90 | 158.80 | 9.80 | 1270.42 | |||
5-year | 175.41 | 180.19 | 15.98 | 1445.71 | |||
7-year | 188.13 | 181.83 | 20.06 | 1472.75 | |||
10-year | 197.19 | 178.39 | 23.05 | 1397.87 | |||
Slope_51 | 77.98 | 93.11 | −273.38 | 894.60 | |||
Slope_101 | 99.77 | 104.46 | −411.17 | 846.76 | |||
Panel B: Correlation Matrix | |||||||
CDS | CSR | LEV | HV | IV | ROA | DEPTH | |
CDS | 1 | ||||||
CSR | −0.216 *** | 1 | |||||
LEV | 0.456 *** | −0.198 *** | 1 | ||||
HV | 0.623 *** | −0.166 *** | 0.286 *** | 1 | |||
IV | 0.553 *** | −0.077 ** | 0.263 *** | 0.683 *** | 1 | ||
ROA | −0.438 *** | 0.134 *** | −0.491 *** | −0.323 *** | −0.328 *** | 1 | |
DEPTH | −0.112 *** | 0.040 *** | 0.069 *** | −0.069 *** | −0.063 *** | −0.03 | 1 |
Year | Mean | Min | Max | SD |
---|---|---|---|---|
2001 | 0.32 | −9 | 9 | 2.19 |
2002 | 0.25 | −9 | 9 | 2.24 |
2003 | −0.22 | −9 | 10 | 1.65 |
2004 | −0.38 | −8 | 11 | 1.79 |
2005 | −0.38 | −8 | 11 | 1.91 |
2006 | −0.38 | −8 | 15 | 2.02 |
2007 | −0.38 | −9 | 14 | 2.09 |
2008 | −0.37 | −9 | 13 | 2.11 |
2009 | −0.38 | −9 | 13 | 2.10 |
2010 | −0.64 | −7 | 17 | 2.50 |
2011 | −0.37 | −7 | 18 | 2.79 |
2012 | 0.62 | −5 | 16 | 2.20 |
2013 | 1.57 | −7 | 17 | 2.85 |
Model | I | II | III | IV | V | VI |
---|---|---|---|---|---|---|
Panel A: Slope of CDS Spreads Measured by Difference between 5-Year and 1-Year CDS Spreads | ||||||
Intercept | 33.459 *** | 29.835 *** | 23.832 *** | 26.051 *** | 34.096 *** | 26.612 *** |
(12.95) | (11.29) | (3.73) | (7.07) | (11.07) | (7.95) | |
CSR | −0.448 *** | −0.360 *** | −0.436 *** | −0.372 *** | −0.192 *** | −0.195 *** |
(−4.18) | (−3.93) | (−4.42) | (−4.37) | (−3.71) | (−3.88) | |
LEV | 0.129 *** | −0.013 | −0.008 | |||
(5.50) | (−1.09) | (−0.67) | ||||
IV | 0.265 ** | −0.225 *** | ||||
(2.05) | (−3.27) | |||||
HV | 0.289 *** | 0.008 | ||||
(3.35) | (0.17) | |||||
CDS | 0.071 *** | 0.063 *** | ||||
(5.24) | (6.28) | |||||
ROA | −0.401 *** | −0.431 *** | ||||
(−2.76) | (−2.99) | |||||
DEPTH | 0.304 ** | 0.309 ** | ||||
(2.20) | (2.19) | |||||
Adj.R2 | 0.027 *** | 0.089 *** | 0.051 *** | 0.128 *** | 0.279 *** | 0.275 *** |
(3.85) | (7.10) | (4.12) | (5.06) | (6.82) | (6.72) | |
Panel B: Slope of CDS spreads measured by difference between 10-year and 1-year CDS spreads | ||||||
Intercept | 67.680 *** | 56.586 *** | 36.078 ** | 45.354 *** | 59.659 *** | 44.706 *** |
(10.11) | (9.66) | (2.18) | (6.20) | (10.33) | (8.31) | |
CSR | −1.157 *** | −0.892 *** | −1.078 *** | −0.879 *** | −0.350 *** | −0.356 *** |
(−4.76) | (−4.41) | (−4.86) | (−4.81) | (−3.48) | (−3.68) | |
LEV | 0.386 *** | −0.041 ** | −0.039 ** | |||
(7.88) | (−2.09) | (−2.02) | ||||
IV | 0.851 ** | −0.489 *** | ||||
(2.46) | (−3.46) | |||||
HV | 0.821 *** | −0.052 | ||||
(4.60) | (−0.62) | |||||
CDS | 0.213 *** | 0.201 *** | ||||
(6.87) | (7.72) | |||||
ROA | −0.448 | −0.494 | ||||
(−1.46) | (−1.60) | |||||
DEPTH | 1.055 * | 1.074 * | ||||
(1.89) | (1.90) | |||||
Adj.R2 | 0.033 *** | 0.116 *** | 0.069 *** | 0.159 *** | 0.410 *** | 0.404 *** |
(4.10) | (7.02) | (4.10) | (5.93) | (8.48) | (8.49) |
Model | CSR_COM | CSR_DIV | CSR_EMP | CSR_ENV | CSR_HUM | CSR_PRO |
---|---|---|---|---|---|---|
(I) | (II) | (III) | (IV) | (V) | (VI) | |
Panel A: Slope of CDS Spreads Measured by Difference between 5-Year and 1-Year CDS Spreads | ||||||
Intercept | 32.662 *** | 33.606 *** | 32.363 *** | 32.728 *** | 32.541 *** | 33.156 *** |
(11.88) | (11.81) | (11.96) | (11.97) | (11.96) | (11.87) | |
CSR | −0.504 *** | −0.656 *** | −0.350 *** | −0.136 | 0.953 *** | 0.743 *** |
(−3.43) | (−5.06) | (−2.63) | (−1.64) | (3.08) | (4.87) | |
LEV | −0.003 | −0.003 | −0.003 | −0.003 | −0.002 | 0.001 |
(−0.28) | (−0.35) | (−0.26) | (−0.24) | (−0.14) | (0.10) | |
IV | −0.229 *** | −0.234 *** | −0.222 *** | −0.232 *** | −0.228 *** | −0.240 *** |
(−3.72) | (−3.70) | (−3.79) | (−3.77) | (−3.73) | (−3.76) | |
CDS | 0.072 *** | 0.069 *** | 0.071 *** | 0.072 *** | 0.072 *** | 0.072 *** |
(6.20) | (6.17) | (6.23) | (6.13) | (6.18) | (6.22) | |
ROA | −0.359 ** | −0.375 ** | −0.327 ** | −0.352 ** | −0.332 ** | −0.365 ** |
(−2.33) | (−2.53) | (−2.16) | (−2.27) | (−2.13) | (−2.30) | |
DEPTH | 0.217 | 0.266 ** | 0.202 | 0.212 | 0.214 | 0.237* |
(1.62) | (2.09) | (1.54) | (1.60) | (1.61) | (1.79) | |
Adj.R2 | 0.275 *** | 0.283 *** | 0.276 *** | 0.274 *** | 0.275 *** | 0.278 *** |
(7.87) | (7.84) | (7.87) | (8.00) | (7.86) | (7.88) | |
Panel B: Slope of CDS spreads measured by difference between 10-year and 1-year CDS spreads | ||||||
Intercept | 56.945 *** | 58.668 *** | 56.505 *** | 57.057 *** | 56.714 *** | 57.702 *** |
(10.83) | (10.70) | (10.86) | (10.92) | (10.86) | (10.84) | |
CSR | −0.801 *** | −1.147 *** | −0.796 *** | −0.234 | 1.320 *** | 1.358 *** |
(−3.12) | (−4.53) | (−3.39) | (−1.38) | (2.91) | (4.88) | |
LEV | −0.019 | −0.017 | −0.018 | −0.019 | −0.017 | −0.012 |
(−0.92) | (−0.90) | (−0.87) | (−0.89) | (−0.85) | (−0.58) | |
IV | −0.478 *** | −0.491 *** | −0.464 *** | −0.482 *** | −0.477 *** | −0.494 *** |
(−3.72) | (−3.73) | (−3.76) | (−3.77) | (−3.73) | (−3.77) | |
CDS | 0.204 *** | 0.198 *** | 0.202 *** | 0.204 *** | 0.205 *** | 0.203 *** |
(7.38) | (7.41) | (7.42) | (7.34) | (7.39) | (7.40) | |
ROA | −0.373 | −0.369 | −0.313 | −0.362 | −0.334 | −0.381 |
(−1.31) | (−1.29) | (−1.10) | (−1.27) | (−1.17) | (−1.32) | |
DEPTH | 0.835 * | 0.921 * | 0.808 * | 0.832 * | 0.838 * | 0.881 * |
(1.71) | (1.94) | (1.68) | (1.72) | (1.74) | (1.81) | |
Adj.R2 | 0.391 *** | 0.397 *** | 0.392 *** | 0.391 *** | 0.390 *** | 0.393 *** |
(8.92) | (8.92) | (8.80) | (8.91) | (8.82) | (8.85) |
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Truong, T.T.T.; Kim, J. Do Corporate Social Responsibility Activities Reduce Credit Risk? Short and Long-Term Perspectives. Sustainability 2019, 11, 6962. https://doi.org/10.3390/su11246962
Truong TTT, Kim J. Do Corporate Social Responsibility Activities Reduce Credit Risk? Short and Long-Term Perspectives. Sustainability. 2019; 11(24):6962. https://doi.org/10.3390/su11246962
Chicago/Turabian StyleTruong, Thuy Thi Thu, and Jungmu Kim. 2019. "Do Corporate Social Responsibility Activities Reduce Credit Risk? Short and Long-Term Perspectives" Sustainability 11, no. 24: 6962. https://doi.org/10.3390/su11246962