Corporate Social Responsibility and Cost of Capital: An Empirical Study of the Taiwan Stock Market

We investigate the relationship between corporate social responsibility (CSR) and the cost of capital. In general, our results suggest that firms with CSR awards have lower cost of capital. In terms of firms' common risk factors, both book-to-market ratio and leverage are positively related to the cost of capital. In addition, family firms with CSR have lower cost of capital than do nonfamily firms with CSR. High earnings quality firms with CSR have significantly lower cost of capital than low earnings quality firms with CSR. Finally, firms with CSR and independent boards have lower cost of capital than firms with CSR but no independent boards.