Corporate social responsibility and the cost of bank debt in Canada

Abstract

This study examines the direct impact of corporate social responsibility (CSR) on the cost of bank debt in a strictly Canadian context. Bank loan information for large, publicly owed, Canadian firms is combined with CSR ratings to form a dataset with 64 observations covering 2004-2005. After controlling for specific firm and loan characteristics with known effects on cost of bank debt, the results show CSR scores to have no significant impact on the cost of bank loans (as measured by the spread over LIBOR). The results also suggest that the dataset was of insufficient quantity to confidently establish relationships. Data covering a larger range of years yielding many more usable observations should be used for future testing of this very important, largely unexplored relationship.