Monetary Policy, Corporate Social Responsibility And Cost Of Debt Financing

In China, debt financing is a significant way of external financing for listed companies. To raise the required capital timely and at a low cost is of momentous significance on expanding reproduction and advancing market competition capability. In recent years, corporate social responsibility has received widespread attention. The investors’ evaluation about the companies is not limited in its financial performance anymore. Investors will give much consideration to the companies’ social responsibility performance. Therefore, corporate social responsibility performance must have certain effect on the cost of debt financing. Moreover, monetary policy is the main measure for a government to regulate macroeconomic, the changes of monetary policy will have a great impact on the cost of debt financing.In theoretical research, we summarize related literatures both in domestic and foreign. Then we present theoretical foundation such as Asymmetric Theory, Contract Theory, Soft Budget Constraints Theory, Credit Ration Theory to analyze how corporate social responsibility and monetary policy influence the cost of debt financing. Based on the data of listed companies during 2009-2013, we explore the relationship between corporate social responsibility and the cost of debt financing under the background of domestic monetary policy. In further research, we discuss if different ownership type sample will have a different empirical result.The empirical results show that good social responsibility performance can significantly reduce the cost of debt financing. The cost of debt financing is higher when monetary policy is tight, but it can be significantly reduced through good social responsibility performance. In non-state-owned companies sample, we find that good social responsibility performance can significantly reduce the cost of debt financing especially when monetary policy is tight, but this effect is not notable in state-owned companies sample.