CSR investment and operating and financial leverage under competitive pressure

Taher Hamza, Rym Mhadhbi and Zeineb Barka
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Taher Hamza: Métis Lab EM Normandie - EM Normandie - École de Management de Normandie = EM Normandie Business School
Rym Mhadhbi: IHEC - Institut des hautes études commerciales (Carthage, Tunisie) - UCAR - Université de Carthage (Tunisie)
Zeineb Barka: IHEC - Institut des hautes études commerciales (Carthage, Tunisie) - UCAR - Université de Carthage (Tunisie)

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Abstract: We investigate the cost of socially behaving firms and its impact on firms' operating and financial leverage. In addition, this relationship is likely to be subject to a potential moderating effect of industry competitive pressure. Using a sample of French-listed companies over 2002-2016, our empirical findings show that: 1) CSR affects positively and significantly, via social performance, the firm operating leverage (OPLEV). Environmental performance however, has no significant impact; 2) industry competition has a significant and negative impact on the association between CSR and OPLEV. In less competitive industries, CSR policy creates a competitive advantage that reduces firm's operating risk; 3) a negative effect of CSR on the financial leverage (FINLEV). Overall, our findings continue to hold after controlling for endogeneity and conducting alternative econometric specifications and have important policy implications.

Keywords: Corporate social responsibility; CSR; Social performance; Environment performance; Operating leverage; OPLEV; Financial leverage; Competitive pressure (search for similar items in EconPapers)
Date: 2024-07-05
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Published in International Journal of Business Governance and Ethics, 2024, 18 (4/5), pp.375-394. ⟨10.1504/IJBGE.2024.139629⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04978155

DOI: 10.1504/IJBGE.2024.139629

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