Is default probability associated with corporate social responsibility?

Abstract

The paper applies a compound option-based structural credit risk model to estimate the short-run and forward default probability for a sample of listing companies from Taiwan. We contribute to the literature by linking the relationship between the corporate social responsibility (CSR) rating and the firm’s default risk. Our empirical results show that good CSR companies have very low short-term default probability and forward default probability. In terms of regression analyses, we find that there is a negative and significant association between CSR score and forward default probability.

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