Abstract
This article examines whether firms adjust their corporate social responsibility (CSR) policies after a substantial drop in their credit rating. The focus is on the investment grade threshold, because of its importance for the firm’s cost of capital and access to debt financing. As this research documents, firms that lose their investment grade ratings (i.e., fallen angels) increase their CSR efforts in subsequent years. The results are strongest during the period 2008-2013, indicating that firms may have learned about the risk-reducing effects of CSR over time. Furthermore, increased CSR efforts help firms recover their credit rating subsequently.