Better CSR Performance Removes Restraints to Capital
Beiting Cheng, Ioannis Ioannou, George Serafeim
Harvard Business School, June 2011
Available
online
According to a study, corporate social responsibility (CSR) can make it easier for firms to secure financing for new projects. A Harvard Business School Working Paper by George Serafeim, Beiting Cheng and Ioannis Ioannou includes the following key concepts:
- The better a firm's CSR performance, the fewer capital restraints it will face.
- Better CSR performance is the result of improved stakeholder engagement, which in turn reduces the likelihood of opportunistic behavior and pushes managers to adopt a long-form strategy. This introduces a more efficient form of contracting with key constituents.
- Firms with good CSR performance are likely to report their CSR activities, thus increasing their overall transparency. Higher levels of transparency ease the fears of potential investors, making them more likely to invest.
