THE IMPACT OF CORPORATE SOCIAL RESPONSIBILITY ON THE COST OF CAPITAL

Abstract

This article examines the concepts of corporate social responsibility and the cost of capital, and analyses scholarly insights into the impact of corporate social responsibility on the cost of capital. The general methods of scientific research, such as analysis and synthesis of scientific literature, grouping and comparison of information, were applied to the study of the concept of corporate social responsibility. In order to assess the impact of corporate social responsibility on the cost of capital, an analysis and synthesis of the empirical research results of scholars who have studied the impact of corporate social responsibility on the cost of capital was carried out, which showed that corporate social responsibility can both reduce and increase the cost of capital. To analyse the relationship between CSR and the cost of capital, scholars have explained the relationship through stakeholder, agency and signalling theories. Stakeholder theory argues that socially responsible companies reduce operational risk and increase trust by ensuring sustainable and ethical relationships with employees, customers, shareholders and the public, and that investors may therefore demand lower investment returns, leading to a lower cost of capital. Agency theory emphasises that CSR can help reduce conflicts of interest between managers and investors by acting as a trust-building mechanism that can reduce the cost of capital. Signalling theory argues that voluntary disclosure of CSR can reduce the cost of capital, while mandatory disclosure can increase investor distrust and increase it. An analysis of the results of research studies on the impact of corporate social responsibility on the cost of capital has shown that corporate social responsibility has an impact on the cost of capital. It was found that in countries with mandatory CSR disclosure, CSR increases the cost of capital, while conversely, in countries where CSR disclosure is voluntary, CSR decreases the cost of capital. This suggests that socially responsible companies can raise capital on more favourable terms and thus reduce the return required by investors.