Dorfleitner, Gregor and Grebler, Johannes and Utz, Sebastian (2020) The impact of corporate social and environmental performance on credit rating prediction: North America versus Europe. JOURNAL OF RISK, 22 (6). pp. 1-33. ISSN 1465-1211, 1755-2842
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We quantify the extent to which the quality of credit rating predictions improves by integrating measures of corporate social performance (CSP) in an established credit risk model. Our analysis provides comprehensive evidence of the comparative informational advantage of considering CSP in predicting credit ratings of North American and European firms. In the North American sample, both environmental and social performance have an explanatory impact. The out-of-sample prediction quality improves by more than 0.8%. By contrast, only social performance increases the explanatory power in the European sample; environmental performance does not. Overall, we show that CSP is a relevant variable for predicting credit ratings. In general, our findings support the risk mitigation view of CSP, indicating that firms with high CSP are less risky and thus have better credit ratings. However, the quality of the relationship depends on the socioeconomic and cultural environment as well, as can be seen from the differing results in North America and Europe.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | INTERACTION TERMS; BOND RATINGS; RESPONSIBILITY; RISK; DEBT; COST; POLICY; LEVEL; MATTER; CYCLE; credit risk; credit rating prediction; corporate social performance; risk mitigation |
| Subjects: | 300 Social sciences > 330 Economics |
| Divisions: | Business, Economics and Information Systems > Institut für Betriebswirtschaftslehre Business, Economics and Information Systems > Institut für Betriebswirtschaftslehre > Lehrstuhl für Finanzierung (Prof. Dr. Gregor Dorfleitner) |
| Depositing User: | Dr. Gernot Deinzer |
| Date Deposited: | 17 Mar 2021 09:15 |
| Last Modified: | 17 Mar 2021 09:15 |
| URI: | https://pred.uni-regensburg.de/id/eprint/44067 |
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