ELEMENTS OF

RESEARCH
DESIGN
Alfian Fery Akbari
Dariel Arnaldo
Laurensius Aditya Joshua W.
Muhammad Kausar Amir
CORPORATE SOCIAL
RESPONSIBILITY
AND
THE COST OF CORPORATE BONDS
Wenxia Ge, Mingzhi Liu
LITERATURE REVIEW
 Friedman, 1962
CSR-related expenditure is considered a poor use of shareholder money and this practice deviates from shareholder value
maximization.
 Freeman, 1984
Corporation should go beyond interests of shareholders and consider the interests of broader group of stakeholders.
 Jones, 1995
CSR is essential for corporations in obtaining necessary resources and stakeholder support.
 Heinkel et al., 2001; Hong and Kacperzyk, 2009; Jones, 1995; Orlitzky et al., 2003
CSR-related information captures the dimension of a corporation’s environmental risk and decreases information asymmetry.
 Jensen and Meckling, 1976;
Any information that mitigates information asymmetries between contracting parties, thereby reducing adverse selection and moral
hazard problems, would be value relevant.
 Botosal, 1997; Diamond and Verrecchia, 1991; Graham et al., 2005; Healy and Palepu, 2001; Leuz and Verrecchia, 2000;
Orlitzky et al., 2003
A large body of literature documents that financial disclosures provide value-relevant information and thus reduce the cost of capital.
 Hong and Kacperzyk, 2009
Socially irresponsible firms may have higher litigation risk, such as from lawsuits regarding environmental pollution, unsafe products, and
employee benefits.
 Heinkel et al., 2001
Socially conscious investors prefer to exclude firms with low CSR performance from their investment portfolios.
LITERATURE REVIEW
 Heinkel et al., 2001
Socially conscious investors prefer to exclude firms with low CSR performance from their investment portfolios.
 Merton, 1987
The larger the relative size of investor base, the lower the cost of capital and the higher the market valuation.
 Dhaliwal et al., 2011
Better CSR performers enjoy a significant reduction in cost of equity capital when they issue standalone CSR reports for the first time.
 Ghoul et al., 2011; Plumlee et al., 2015
Firms with better environmental performance have lower costs of equity capital.
 Goss and Roberts, 2011
The cost of bank loans for firms with social responsibility concerns is higher than for more responsible firms; however, banks do not reward
CSR investments of borrowers.
 Diamond, 1984; Rajan, 1992; Bhattacharya and Chiesa, 1995; Fama, 1985; Diamond, 1984
Public debt financing differs from private debt financing in terms of monitoring efficiency and private information availability indicates
that a bank, as a financial intermediary, can solve the information duplication and free-rider problems by monitoring borrowers.
 Rajan, 1992
Concentrated bank debt lenders have more incentive to monitor borrowers compared to dispersed, “arm’s length” debtholders.
 Fama, 1985
Private debt lenders are more efficient and effective in obtaining private information about borrowers than public bondholders are.
HYPOTHESIS DEVELOPMENT
1. CSR performance is negatively associated with bond
yield spreads.
2. CSR strengths are negatively associated with bond yield
spreads.
Sample Selection

Empirical Models
•Dependent Variable
•Test Variables
•Firm-level Control
RESEARCH DESIGN
Variables
•Bond-level Control
Variables
•Industry and Year
Indicator Variables
Sample Selection
 CSR rating scores from the KLD STATS database, which
provides ratings for 13 dimensions of corporate CSR
performance.
 Bond-specific information from the Mergent Fixed Income
Securities Database.
 Bond issuer financial information from the Compustat
North America database.
Empirical Models
Audit Pricing and
Nature of Controlling
Shareholders :
Evidence from
France
Chiraz Ben Ali
Cedruc Lesage
Purpose of Study
Memeriksa apakah auditor di hire sebagai mekanisme
pemantauan (monitoring) dalam memitigasi Agency
Problem yang disebabkan karena adanya berbagai tipe
Controlling Shareholders.
Introduction
CG studies kebanyakan fokus pada agency problem type
1. hal ini terjadi di negara-negara yang memiliki investor
protection yang besar.

Di Perancis, hal ini tidak berlaku, dikarenakan investor

protection disini masih rendah. Jadi Agency problem type
1 lebih rendah, tetapi Agency problem type 2 tinggi.
(antara controling shareholrder vs minority)
Paper ini menelaah pengaruh nature dari controlling
shareholder ke audit fee.

 Audit= Monitoring Cost

 Higher risk = Higher Audit fee
Perbedaan dari Study sebelumnya dan
Results.
 Show Alignment vs Entrenchment
 Finds out that institutional ownership increase audit fees.
 Negative relationship on government ownership and
audit fees.
 No significant relationship, famil ownership and audit
fees.
 Family firm face agency problem type 2 more often than
type 1.
Theorical
Background
2.1 Controlling Shareholders and Agency
Conflicts
 Ketika investor protection lemah, controlling shareholders
memiliki control yang efektif based on high percentage
yang dimiliki.
 Hal ini memicu timbulnya Agency problem Type 2
 maka dari itu, dibutuhkan investor protection untuk
melindungi minority shareholders.
2.2 Auditing and Agency Conflicts
 Ketika Agency Problem lebih tinggi, time spent by auditor lebih
banyak & audit fee lebih besar

AUDFEE = p * q + E(L)

p= hourly pricing
q= number of auditing hours
E(L)= risk premium
 p*q merupakan audit effort yg dibutuhkan, berdasakan evaluasi
ada 2 resiko (Inherent & Control)
 E(L) berdasarkan higher agency conflict, ini meningkatkan litigation
risk serta greater effort to prevent misstatement. Hal ini akan
meningkatkan audit fees.
2.3 Audit Fees and Nature of Ownership
 Chan (1993) : Significant relationship between insider
ownership and audit fee (small firm)
 Firth (1997) : non significant relationship between insider
owrnership consentration & audit fees (di norwegia)
 Piot (2001) : Non significant relationship between insider
ownership and the choice of big audit firms.
 Niemi (2005) : non significant relationship between audit
fees and managerial and non-managerial ownership.
Hypotheses
Development
3.1 Family Ownership
 In France, mostly firms are owned by family, thus
expropriation(penggunaan control untuk memperkaya diri
sendiri) risk is higher .
 Jaggi and Leung (2007) efektifitas komite audit berada diposisi
rendah ketika family ownership is present
 Pochet, La Porta et al, Hirigoyen : negatif relationship between
family ownership and audit fees.

Ada beberapa study yang menunjukan family ownership have

higher firm value and less information asimetri (miskom)
3.2 Govenrment Ownership
 Chun-an & Chuan-Ying (2008) karena Government
sekalisgus menjalankan peran monitoring, firm risk
berkurang, hal ini menyebabkan audit fee juga
berkurang.
 Jika government fail untuk melakukan fungsi monitoring,
‘they may suffer from reputation cost’

Inti dari berbagai studi yang dilakukan, government

ownership memiliki pengaruh negatif terhadap audit fees.
3.3 Institutional Ownership
 Tedapat mixed opinion pada studi ini,
 Ada yang beranggapan bahwa audit fees akan tinggi
karena firms tend to hire auditor bagus untuk menarik
investor
 Tetapi ada juga yang berkata bahwa hal ini
berhubungan negatif karena instititional owned,
‘engaged in company affair’ maka dari itu reduced
inherent risk.