Does Corporate Social Responsibility Have an Impact on Financing Decisions?

This paper examines whether corporate social responsibility (CSR) performance affects (i) capital structure and (ii) the size of equity issuances. Using a worldwide dataset of 6,589 firm-year observations, we find that (i) CSR performance negatively affects firms’ leverage. We also show that (ii) high CSR firms issue a larger volume of equity and that such firms are less dependent on market conditions for their equity issuances. Overall, our results reveal that firms take into account the financial consequences of implementing CSR policies in their financing decisions.
JEL Codes: G32; M14.
Keywords: Corporate Social Responsibility; Capital Structure; Market Timing Theory; Information Asymmetry.