Corporate social performance and firm debt levels: Impacts of the covid-19 pandemic and institutional environments

Min Bai () and Ly Ho

Finance Research Letters, 2022, vol. 47, issue PB

Abstract: This paper examines the relation between corporate social performance (CSP) and firm debt levels and explores the channels between them by focusing on the ongoing health crisis, the COVID-19 pandemic. We use a large sample of public firms from 31 countries between 2002 and 2020. Employing pooled ordinary least squared and firm fixed effects models, after controlling for endogeneity and sample selection bias, we find that during the pre-COVID economic condition, CSP has a significantly positive impact on firm debt levels by reducing financial constraints and enhancing stakeholder engagement. However, during the outbreak, CSP becomes costlier and reveals more managerial agency problems for firms that make such associations attenuated. Furthermore, our evidence suggests that in countries with better institutional environments, the CSP-firm debt levels relation is less pronounced. These results have several implications in terms of investment and capital structure decisions.

Keywords: CSP; Firm Debt Levels; COVID-19 Pandemic; Institutional Environments; Financial Constraints; Stakeholder Engagement (search for similar items in EconPapers)
JEL-codes: G30 I10 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:47:y:2022:i:pb:s1544612322002227

DOI: 10.1016/j.frl.2022.102968

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