Corporate Social Responsibility and Capital Structure
DOI:
https://doi.org/10.14392/asaa.2023160207Keywords:
Corporate Social Responsibility, Capital Structure, Gross Domestic Product, ESG ScoreAbstract
Objetivo: We analyze the effects of capital structure influence on corporate social responsibility (CSR) performance, represented by the ESG score. Prior studies have investigated distinct factors to settle CSR adoption. Nonetheless, corporate social responsibility literature has not yet achieved common consent.
Method: This study uses a quantitative research approach. We used a sample of listed companies from the United States of America, China, Japan, Germany, India, the United Kingdom, France, Italy, Brazil, and Canada. Three estimators were applied in the regression model: OLS pooled, IV 2SLS, and GMM 2SLS.
Results: Our findings indicate a positive and significant relationship between Capital Structure and CSR. This study empirically assesses the impact of a company's capital structure on the ESG ratings of listed companies in the world's ten largest economies. Our results are compatible with model predictions in confirming that a higher investment in capital structure affects ESG performance. We find that the variations found between countries, especially companies from nations with higher GDP, need a more significant capital structure than smaller ones to obtain a positive CSR index. This contrast could be due to the companies' size and Nation culture.
Contributions: The paper argues that the capital structure can be introduced related to adopting corporate social responsibility. Our paper contributes to the literature examining the effects of capital structure on CSR practices. While there is a rich body of theoretical work on the impact of capital structure on profitability, investment returns, firm value, our study adds to a relatively recent literature strand that tests the theoretical predictions of capital structure on CSR practices, represented by ESG scores. Specifically, it contributes to two strands of the empirical literature. First, our study contributes to empirical work investigating how investments through the capital structure in CSR practices affect corporate ESG rating. Second, our study contributes to the literature examining the effects of capital structure on the ESG scores of different countries.
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