Gordon S. Roberts, A General Equilibrium Theory of Asset Prices, with Applications to the Theory of the Term Structure of Interest Rates, The Journal of Finance, Vol. 28, No. 1 (Mar., 1973), pp. 223-224

This study examines the link between corporate social responsibility (CSR) and bank debt. Our focus on banks exploits their specialized role as delegated monitors of the firm. Using a sample of 3996 loans to US firms, we find that firms with social responsibility concerns pay between 7 and 18 basis points more than firms that are more responsible. Lenders are more sensitive to CSR concerns in the absence of security. We document a mixed reaction to discretionary CSR investments. Low-quality borrowers that engage in discretionary CSR spending face higher loan spreads and shorter maturities, but lenders are indifferent to CSR investments by high-quality borrowers.

This note validates the key results of prior studies of bank loan announcement effects using a common data set drawn from the Canadian capital market. Announcements of bank loans are associated with positive abnormal returns significantly higher than for private placements and loan syndications. Announcement effects are most pronounced when monitoring is most intense and when an announcement signals that the bank's private information is favorable. Conclusions of prior studies on bank loan announcements, conducted exclusively on US data, are robust for a different banking system.

Boquist, Racette, and Schlarbaum [3] and Livingston [6] show that a security systematic risk may be expressed as a function of its duration. These results have led to research examining the role of duration in explaining systematic risk, but Lanstein and Sharpe [5] indicate that Livingston's expression relies on the implicit assumption that extra-market covariances between securities are insignificant. Lanstein and Sharpe argue that such an assumption is unwarranted. They find a significant negative relationship between extra-market covariances and differences in duration between paired samples of common stock. Their paper suggests that duration may be associated with unsystematic risk and that any relation between duration and systematic risk is more complex than implied in [3] and [6].