CORPORATE SOCIAL RESPONSIBILITY AND ITS EFFECT ON CORPORATE BOND YIELD SPREAD

Abstract

This study examines whether there is a relation between Corporate social responsibility activities and U.S. corporate bond risk premium in U.S. secondary markets by analyzing a sample with a period of 2002 – 2012. The risk premium is estimated as a yield spread between corporate bond yields and U.S. Treasury yields with similar characteristics. I find that overall corporate social responsibility score is negatively associated with corporate bond yield spread and when ceteris paribus, increase of overall corporate social responsibility score by one-point results a decrease of risk premium by 4,48 basis points. Suggesting that fixed-income investors value socially responsible firm’s less risky.