Does Regional Favoritism Affect the Relationship between CSR Performance and the Ability to Obtain Bank Loans?

Abstract

This study examines the relationship between corporate social responsibility (CSR) performance and the ability to obtain bank loans in China. Using Rankins’ (RKS) ratings over the period 2010–2015, we find that companies with higher CSR performance can obtain more bank loans with longer maturity. As regional favoritism is a particular kind of behavior in China’s relational society, we examine whether firms that are favored by senior officials are helped with their debt financing from banks. The results indicate that CSR performance has a more positive effect on firms’ ability to obtain bank loans when the firms benefit from favoritism by senior officials. Further research finds that the effect of CSR performance on bank loans is stronger since the passage of a new environmental protection law and stronger at firms with higher degree of favoritism by senior officials.