Do CSR Ratings Affect Loan Spreads? Evidence from European Syndicated Loan Market

Danilo Drago, Concetta Carnevale
2020 Sustainability  
We investigate whether corporate social responsibility (CSR) ratings affect the syndicated loan spreads paid by European listed firms. By performing ordinary least squares (OLS) pooled regressions on a sample of 1101 syndicated loans granted to European companies, we find evidence that borrowers' CSR ratings have a significant impact on loan spreads. However, the relationship between CSR ratings and loan spreads is quite complex. Low CSR-rated firms pay higher loan spreads than better CSR-rated
more » ... firms, but high CSR ratings are not always rewarded by lenders. The benefits of a high CSR rating level are significant only for firms located in countries that pay great attention to sustainability issues. Overall, our work provides a key to reconciling the mixed results obtained in the empirical literature, as we find evidence of a significant lack of homogeneity within the European Union countries regarding the relationship between CSR performance and the cost of debt financing.
doi:10.3390/su12187639 doaj:9c664300d37b4bed928fc682b7acca62 fatcat:urls4pjd3rdc5pz2egibys27re