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Constraints on “Doing Good”: Financial constraints and corporate social responsibility

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  • Leong, Chee Kian
  • Yang, Yung Chiang

Abstract

Using a propensity score matched sample of firms, we find that financially constrained firms have significantly higher CSR concerns, which significantly impairs their overall CSR performance. Firms facing financial constraints may prioritize by strengthening their CSR performance in employee relations, corporate governance and the environment. Despite such prioritization, financial constraints significantly impair overall CSR performance in all CSR dimensions, except human rights.

Suggested Citation

  • Leong, Chee Kian & Yang, Yung Chiang, 2021. "Constraints on “Doing Good”: Financial constraints and corporate social responsibility," Finance Research Letters, Elsevier, vol. 40(C).
    • Handle: RePEc:eee:finlet:v:40:y:2021:i:c:s1544612320308485
    DOI: 10.1016/j.frl.2020.101694
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    References listed on IDEAS

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    1. Sakunasingha, Benjalux & Jiraporn, Pornsit & Uyar, Ali, 2018. "Which CSR activities are more consequential? Evidence from the Great Recession," Finance Research Letters, Elsevier, vol. 27(C), pages 161-168.
    2. Roland Bénabou & Jean Tirole, 2010. "Individual and Corporate Social Responsibility," Economica, London School of Economics and Political Science, vol. 77(305), pages 1-19, January.
    3. Lamont, Owen & Polk, Christopher & Saa-Requejo, Jesus, 2001. "Financial Constraints and Stock Returns," The Review of Financial Studies, Society for Financial Studies, vol. 14(2), pages 529-554.
    4. Chan, Chia-Ying & Chou, De-Wai & Lo, Huai-Chun, 2017. "Do financial constraints matter when firms engage in CSR?," The North American Journal of Economics and Finance, Elsevier, vol. 39(C), pages 241-259.
    5. Harrison Hong & Jeffrey D. Kubik & Jose A. Scheinkman, 2012. "Financial Constraints on Corporate Goodness," NBER Working Papers 18476, National Bureau of Economic Research, Inc.
    6. Steven N. Kaplan & Luigi Zingales, 1997. "Do Investment-Cash Flow Sensitivities Provide Useful Measures of Financing Constraints?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(1), pages 169-215.
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    Cited by:

    1. Wang, Peizhang, 2023. "Corporate social responsibility and corporate innovation–The moderating role of CEO social capital," Finance Research Letters, Elsevier, vol. 55(PA).
    2. Lei, Ni & Miao, Qin & Yao, Xin, 2023. "Does the implementation of green credit policy improve the ESG performance of enterprises? Evidence from a quasi-natural experiment in China," Economic Modelling, Elsevier, vol. 127(C).
    3. Wan, Peng & Chen, Xiangyu & Ke, Yun & Dong, Wang, 2024. "Does local government debt affect corporate social responsibility? Evidence from China," International Review of Economics & Finance, Elsevier, vol. 89(PB), pages 334-348.

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    More about this item

    Keywords

    Propensity score matching; Financial constraints; Corporate social responsibility;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm

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