Does corporate social responsibility pay? Evidence from social ratings in microfinance institutions

Does it pay for microfinance institutions (MFIs) to be socially responsible? Drawing on the information asym-metry framework and using an aggregate measure of social performance (social ratings), we investigate the association between MFI corporate social performance (CSP) and capital structure. Our findings suggest that among investors, a relationship between social performance and capital structure only emerges when considering subsidies. We also investigate the effects of profit orientation by analyzing whether the financial structure of for-profit (vs nonprofit) MFIs is sensitive to social ratings. Our findings highlight the importance of social perfor-mance as a major determinant of MFI capital structure.