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

Author

Listed:
  • Mohammed Benlemlih

    (Métis Lab EM Normandie - EM Normandie - École de Management de Normandie)

  • 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)

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.

Suggested Citation

  • Mohammed Benlemlih & Mohammad Bitar & Elias Erragragui & Jonathan Peillex, 2021. "New Evidence on the Relationship Between Corporate Social Responsibility and the Use of Equity Capital," Post-Print hal-03821683, HAL.
    • Handle: RePEc:hal:journl:hal-03821683
    DOI: 10.7202/1077792ar
    as

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    Cited by:

    1. Erragragui, Elias & Peillex, Jonathan & Benlemlih, Mohammed & Bitar, Mohammad, 2023. "Stock market reactions to corporate misconduct: The moderating role of legal origin," Economic Modelling, Elsevier, vol. 121(C).

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