Analysis of the nonlinear relationship between Corporate Social Responsibility and cost of debt in Brazil

Abstract

In the late 20th century, sustainability became a focal point for discussions, raising concerns about the role of companies and financial institutions in addressing socio-environmental issues. This challenged the traditional profit-driven model. As sustainable development gained traction, it became evident that Corporate Social Responsibility (CSR) impacts a company's value generation and influences investor decisions and financiers. Based on these findings, an extensive literature on sustainable finance has emerged, but some aspects of this topic still lack of investigation, particularly regarding the relationship between sustainable practices and financing costs. Given the complexities of this relationship, especially in emerging countries, this research aims to analyze the 'U'-shaped relationship between the performance and disclosure of Corporate Social Responsibility and the cost of debt in Brazilian companies. Using multiple linear regression analysis, it is intended to investigate how these variables, along with others from existing literature, impact the cost of debt. The expected results may influence sustainable strategies within companies, credit-granting policies of financial institutions, and regulations regarding the disclosure of sustainability information.