Punishment by Securities Regulators, Corporate Social Responsibility and the Cost of Debt

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

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Detail(s)

Original languageEnglish
Pages (from-to)337–356
Journal / PublicationJournal of Business Ethics
Volume171
Issue number2
Online published27 Jan 2020
Publication statusPublished - Jun 2021

Abstract

This study examines whether penalties issued to Chinese listed companies by securities regulators for violations of corporate law affect the cost of debt, and the moderating role of corporate social responsibility (CSR) fulfillment on this relationship. Our sample consists of firms listed on Shanghai and Shenzhen stock exchanges from 2011 to 2017 and the data are collected from the announcements of China Securities Regulatory Commission. The findings are as follows: (1) punishment announcements by regulatory authorities increase the cost of debt; and (2) the effect of punishment announcements on the cost of debt is partially offset by prior CSR performance. These findings are shown to be robust. The reputation insurance effect of CSR is more pronounced in state-owned enterprises and in an institutional environment with low marketization, a weak legal environment, and low information transparency. The findings support the reputation insurance hypothesis of CSR and employ the cost of debt as a governance mechanism.

Research Area(s)

  • Administrative punishment, Corporate social responsibility, Corporate violation, Debt financing

Citation Format(s)

Punishment by Securities Regulators, Corporate Social Responsibility and the Cost of Debt. / Gong, Guangming; Huang, Xin; Wu, Sirui; Tian, Haowen; Li, Wanjin.

In: Journal of Business Ethics, Vol. 171, No. 2, 06.2021, p. 337–356.

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review