METHODOLOGY FOR VALUATION OF THE IMPACT OF SOCIAL RESPONSIBILITY ON THE COST OF CAPITAL OF PUBLIC COMPANIES
Keywords:social responsibility, cost of capital, public company
A research methodology has been developed to determine the impact of social responsibility on the cost of capital of public companies. The methodology consists of selecting the companies to be studied, predicting the cost of capital and the control variables, and building a theoretical regression model. The first stage is devoted to the selection of the companies to be studied. This stage of the study describes the criteria for assessing social responsibility, on the basis of which 242 socially responsible and 242 non-socially responsible public companies were selected from the Bloomberg database. The second phase provides the methodology for calculating the cost of capital of the companies. It is planned to use PEG (according to Easton, (2004)) to calculate the cost of equity and the realised cost of debt – for estimation of cost of debt capital. The selected control variables are: firm size, financial leverage, market to book value ratio, return on assets, current ratio, total liabilities to total assets ratio, assets turnover ratio, gross profit margin, and risk-free interest rate. The third stage describes the methodology for determining of the impact of social responsibility on the cost of capital of public companies. The theoretical regression models are built using econometric modelling. The theoretical regression models are constructed and indicators for assessing their robustness are provided, consisting of an assessment of the assumptions of the models and an assessment of the statistical significance of the econometric models, which will include the position and dispersion characteristics of the data.