The Effect of Social Responsibility on the Credit Rating of Companies due to the Adjusting Role of Low to High Stock Returns

Document Type : Research Paper

Authors

1 Associate Professor, of Accounting, East Tehran Branch, Islamic Azad University, Tehran, Iran.

2 M.A. of Accounting, Qom University, Qom, Iran.

10.22103/jak.2021.15981.3267

Abstract

Objective: Today, identifying the factors affecting the credit rating is of particular importance in terms of comparing the credit risk of one firm with other firms and also in terms of competitiveness of the firm. The purpose of this study was the effect of Social Responsibility on the Credit Rating of Companies due to the Adjusting Role of Low to High Stock Returns
 
Method: The present study is an applied research in terms of purpose. Also, in this study, according to the type of data and available analysis methods, the combined data method has been used. Data collection method, document mining method and referring to databases; and the method of data analysis is inferential. In the present study, the required data have been extracted from the new Rahvard software, corporate financial statements and documentation, as well as the Cadal site. The statistical population of the present study is all companies listed on the Tehran Stock Exchange in the period 2011 to 2020 and the software used to prepare data and estimate models is Eviews 10. Combined data model was used to test the research hypotheses.
 
Results: The results of the research hypothesis test show that social responsibility has a positive and significant effect on the credit rating of the company. In other words, increasing the level of importance of the company to the category of social responsibility increases the company's credit rating with creditors. Also, the results showed that Low to High Volatility of Sales Market have a negative and significant effect on the relationship between social responsibility and the company's credit rating. Thus, when companies fluctuate from Low to High Volatility of Sales Market, the implementation of social responsibility clauses will not have much effect on the favorable opinion of creditors, and creditors will reduce the credit rating of companies; Therefore, increasing low-to-high volatility of stock returns leads to a weakening of the relationship between social responsibility and the credit rating of companies.
 
Conclusion: Investors and lenders are more interested in companies that perform well in various aspects of social responsibility. This leads to these companies gaining more credit with investors and creditors through the implementation of social responsibility clauses. Also, with the increase of Low to High Volatility of Sales Market, the stock prices crash risk increases, which can cause creditors to be pessimistic about the company for non-payment of their tax obligations; As a result, in such circumstances, the implementation of social responsibility clauses will not have much effect on the favorable opinion of creditors, and creditors will reduce the credit rating of companies. Investors and creditors can use the results of this study to select the right companies to invest. Also, organizations that rank companies can use low to high fluctuations in stock returns and social responsibility as two very important and determining factors in the ranking.

Keywords

References

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History

  • Receive Date: 25 June 2020
  • Revise Date: 20 February 2021
  • Accept Date: 10 March 2021

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