New Evidence on the Relationship Between Corporate Social Responsibility and the Use of Equity Capital

Mohammed Benlemlih, Mohammad Bitar, Elias Erragragui () and Jonathan Peillex ()
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Mohammed Benlemlih: Métis Lab EM Normandie - EM Normandie - École de Management de Normandie = EM Normandie Business School
Mohammad Bitar: UON - University of Nottingham, UK
Elias Erragragui: Kedge Business School [Talence], LEFMI - Laboratoire d’Économie, Finance, Management et Innovation - UR UPJV 4286 - UPJV - Université de Picardie Jules Verne
Jonathan Peillex: LEFMI - Laboratoire d’Économie, Finance, Management et Innovation - UR UPJV 4286 - UPJV - Université de Picardie Jules Verne

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Abstract: In this paper, we study the reverse U-shaped relationship between Corporate Social Responsibility (CSR) and firms' use of equity capital. Using a large sample of U.S. publicly listed companies, we provide strong evidence that CSR is positively associated with the use of equity capital when CSR practices are below a certain level. Once the CSR investment exceeds this level, the relationship between CSR and the equity financing becomes negative. Our findings are robust when we use the individual components of CSR, and several approaches to address endogeneity. Overall, our results enrich the debate about capital structure of high CSR firms and suggest that the CSR-capital structure relationship is more complex than what has been demonstrated in previous literature.

Keywords: Corporate Social Responsibility; Capital Structure; Corporate Governance; Agency Theory; Responsabilidad social empresarial; Estructura capital; Gobierno corporativo; Teoría de la Agencia; Responsabilité Sociale des Entreprises; Structure du Capital; Gouvernance d’Entreprise; Théorie d’Agence (search for similar items in EconPapers)
Date: 2021-05-27
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Citations: View citations in EconPapers (1)

Published in Management international = International management = Gestión internacional, 2021, 25 (2), pp.200-217. ⟨10.7202/1077792ar⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03821683

DOI: 10.7202/1077792ar

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