New Paper: CSR and Access to Finance

With this paper, written with George Serafeim (HBS) and Beiting Cheng (HBS), we contribute both empirically and theoretically towards the debate of whether CSR strategies create value for the firm in the long run. Unlike previous studies that have focused primarily on the social – financial performance link, in our work we investigate whether CSR may contribute to long-term value creation by facilitating access to financing resources through capital markets. In particular, we suggest that better access to finance may result from reduced agency costs, due to enhanced stakeholder engagement for firms with high CSR performance, and from increased transparency due to the increased likelihood of non-financial reporting (disclosure) by firms with high CSR performance.

To investigate the impact that CSR has on capital constraints, we use data from Thompson Reuters ASSET4 for 2,439 publicly listed firms during the period 2002 to 2009. The results confirm that firms with better CSR performance face lower capital constraints. We test the robustness of the results, by substituting the KZ index (our measure of capital constraints) with an indicator variable for stock repurchase activity, and we find similar results. Importantly, the results remain unchanged when we implement an instrumental variables approach and a simultaneous equations model, mitigating potential endogeneity concerns or correlated omitted variables issues, and providing evidence for a causal argument. Finally, we disaggregate CSR performance into its three components to gain insight as to which pillars have the greatest impact on capital constraints. We find that the result is driven primarily by social and environmental performance.

Available through SSRN here.

My Research

I am a strategy scholar whose research focuses on Sustainability and Corporate Social Responsibility (CSR). More specifically, I seek to understand whether, how, and the extent to which the modern business organization contributes towards building a sustainable future. My academic work evolves around two main themes: a) understanding how investment analysts, and the public equity markets, perceive, evaluate and react to corporate engagement with, and integration of, environmental and social issues into strategy and b) understanding the multiple factors (e.g. institutional, regulatory, behavioural) that may affect, drive or hinder, the corporate decision to adopt environmentally and socially responsible strategies.

Upcoming Events

January 25, 2018

Prof. Ioannou will give a research seminar at the University of Leeds

March 1, 2018

Prof. Ioannou will be a visiting Professor at ESMT, in Berlin until June

April 23, 2018

Prof. Ioannou will be speaking at the 2018 European Pensions and Investments Summit