Do Companies Need Financial Flexibility for Sustainable Development?

Haifeng Zhang, Zhuo Zhang and Ekaterina Steklova
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Haifeng Zhang: College of Economics and Management, Nanjing University of Aeronautics and Astronautics, Nanjing 211106, China
Zhuo Zhang: College of Economics and Management, Nanjing University of Aeronautics and Astronautics, Nanjing 211106, China
Ekaterina Steklova: Tengfay Consulting, 64 Meadowlane Dr, Kitchener, ON N2N1E9, Canada

Sustainability, 2020, vol. 12, issue 5, 1-14

Abstract: Reserve financial flexibility relates to the long-term development of enterprises. Enterprise managers pay more and more attention to the financial flexibility of reserves, which, however, will cause problems such as insufficient investment and inefficient use of funds. This paper collects data from the listed companies in the Shanghai and Shenzhen Stock Exchanges from 2009 to 2017. Our main results include the following. First, corporate social responsibility has a certain substitution effect on financial flexibility. Second, after excluding state-owned enterprises and politically-linked enterprises, there is a stronger substitution effect between social responsibility and financial flexibility for private enterprises without political connections. Third, the substitution effect between social responsibility and financial flexibility is stronger in companies with high environmental uncertainty and financing constraints. Furthermore, using a 2SLS procedure, we have verified that the substitution effect between social responsibility and financial flexibility is robust.

Keywords: corporate social responsibility; financial flexibility; substitution effect; sustainable development (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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