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

Author:

Benlemlih Mohammed1,Bitar Mohammad2,Erragragui Elias3,Peillex Jonathan4

Affiliation:

1. EM Normandie Business School, Métis Lab, France

2. Nottingham University Business School, University of Nottingham

3. Université de Picardie Jules Verne, CRIISEA

4. ICD Business School, Université de Picardie Jules Verne, CRIISEA

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.

Publisher

Consortium Erudit

Subject

General Medicine

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