Corporate social responsibility, investor protection, and the cost of equity: Evidence from East Asia

We document that corporate social responsibility (CSR) activities increase the cost of equity in East Asia. Further, the effect is driven by economies with weak investor protection. Our findings are robust to alternative variable measurements, accounting for endogeneity of CSR, and various methodological specifications. The positive relation between CSR and the cost of equity is attributable to the high agency conflicts in East Asian economies. Our findings highlight that the effect of CSR is contingent on the research context, and emphasize the importance of enhancing investor protection and mitigating agency conflicts for the promotion of CSR.