Does Ethic Rating Decrease Firms’ Cost of Capital? Empirical Insights from the Italian Setting
Journal Title: International Journal of Academic Research in Accounting, Finance and Management Sciences - Year 2015, Vol 5, Issue 4
Abstract
This paper focuses on the issues relating to the reduction of firms’ cost of debt connecting to the ethic rating score as a topic of crucial relevance especially in terms of creditworthiness. The literature on ethic rating presents risk reduction as potential benefits. Consequently, an efficient market should recognize an “ethical financial premium” to socially responsible firms, corresponding to a less cost of debt financing. We have developed a model using the annual report of all Italian listed firms and the ratings issue by Standard Ethics. The sample is composed by 186 observations, so we have used a panel data analysis to test our research hypothesis. Overall, the results are statistically significant but the financial market does not recognize an ethical premium to socially responsible firms. It means that variables chosen can explain the whole model, but specifically there is not a positive association between cost of debt and ethic rating.
Authors and Affiliations
Enrica Sepe, Margherita Smarra, Marco Sorrentino
Keywords
Related Articles
- EP ID EP138139
- DOI 10.6007/IJARAFMS/v5-i4/1845
- Views 112
- Downloads 0
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