Corporate social responsibility and firms' cost of equity: how does culture matter?

Purpose - The purpose of this paper is to examine the relationship between corporate social responsibility (CSR) and cost of equity in an international context assessing the moderating effect of culture on the relation between CSR and the cost of equity. Design/methodology/approach - The authors use an international sample of 42 countries, and companylevel data from 2002 to 2013, to address cross-country variations in the effects of CSR on cost of equity in different cultural contexts. Findings - The authors first substantiate previous research and show that the more a company is engaged in CSR, the lower its cost of equity. The authors then find that the relationship between CSR and cost of equity is stronger in countries with lower levels of assertiveness and higher levels of humane orientation and institutional collectivism. Practical implications - The study advances understanding of how national culture promotes socially and environmentally responsible behavior. The implementation of CSR strategies depends on cultural norms, so companies need to be sensitive to local demands and adjust their CSR approaches accordingly. Originality/value - The paper highlights the need to study how culture influences the relationship between CSR and cost of equity.