Corporate social responsibility and credit spreads: evidence from family firms in China

Abstract

This paper examines the relationship between corporate social responsibility (CSR) and the credit spreads of corporate bonds issued by Chinese family firms. Drawing on signaling theory, we argue that CSR serves as a credible signal to reduce information asymmetry, thereby lowering credit spreads. Using a sample of Chinese family firms from 2011 to 2019, we find that CSR performance is negatively associated with bond credit spreads, supporting our signaling hypothesis. More intriguingly, technical CSR, directed toward primary stakeholders, exhibits a stronger effect than institutional CSR, directed toward secondary stakeholders . Moreover, institutional ownership and analyst coverage weaken the negative relationship between CSR performance and credit spreads. This paper contributes to the growing literature on CSR and cost of bond financing by focusing on the unique context of family firms in China. It also advances the understanding of CSR by decomposing it into distinct dimensions. Our findings offer practical insights for family firms seeking to balance technical and institutional CSR.