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Social responsibility and corporate borrowing

Liu, Huajin; Li, Youwei; Xiao, Yajun; Xiong, Xiong; Zhang, Wei

Authors

Huajin Liu

Yajun Xiao

Xiong Xiong

Wei Zhang



Abstract

We study the impact of social capital, measured by corporate social responsibility (CSR) performance, on corporate borrowing. Using a sample of 120,204 bank loan applications of China's listed firms, we find that an increase in CSR performance increases the loan amounts of approved loans, although it does not alter the likelihood of loan approval. Using aggregate loans at the firm level, we show that CSR performance positively impacts firms' long-term borrowing from banks but does not affect their short-term borrowing. The economic magnitude of the positive effect is large at both the loan and firm levels. We attribute this positive relationship to reduced information asymmetry and improved risk mitigation. Surprisingly, we find that banks do not discipline their borrowers' CSR investments through the lending relationship. Specifically, when borrowers exhibit high CSR performance and borrow from banks with high CSR performance, further increases in CSR no longer correlate with larger loan amounts. Our findings suggest that China's state-led green credit policies should be more market-oriented.

Citation

Liu, H., Li, Y., Xiao, Y., Xiong, X., & Zhang, W. (in press). Social responsibility and corporate borrowing. The European journal of finance, https://doi.org/10.1080/1351847X.2024.2377356

Journal Article Type Article
Acceptance Date Jun 19, 2024
Online Publication Date Jul 25, 2024
Deposit Date Jul 26, 2024
Publicly Available Date Dec 11, 2024
Journal European Journal of Finance
Print ISSN 1351-847X
Publisher Routledge
Peer Reviewed Peer Reviewed
DOI https://doi.org/10.1080/1351847X.2024.2377356
Public URL https://hull-repository.worktribe.com/output/4744839

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Publisher Licence URL
https://creativecommons.org/licenses/by-nc-nd/4.0/

Copyright Statement
© 2024 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group. This is an Open Access article distributed under the terms of the Creative Commons Attribution-NonCommercial-NoDerivatives License (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-commercial re-use, distribution, and reproduction in any medium, provided the original work is properly cited, and is not altered, transformed, or built upon in any way.




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