More Corporate Social Responsibility, Less Leverage Adjustment Speed: a Fact?

Document Type : Research Paper

Authors

1 Associate Professor of Accounting, Faculty of Administrative and Economic Sciences, Ferdowsi University of Mashhad, Mashhad, Iran

2 Assistant Professor of Accounting, Department of Accounting, Payam Noor University, Iran.

Abstract

The purpose of this article is to investigate the effect of corporate social responsibility (CSR) on the speed of adjustment of financial leverage. According to various theories such as signaling theory, information asymmetry, dynamic equilibrium theory, etc., companies that have higher transaction costs move to their target lever at a lower speed, or so-called lever adjustment speed. According to these theories, companies that score higher in terms of CSR indicators have the possibility of financing through more leverage and using financial leverage at a lower cost. Therefore, we expect leverage adjustment to be faster in companies that meet CSR requirements.

In this study, a sample of 84 companies listed on the Iranian Stock Exchange over a period of 8 years from 2011 to 2018 have been studied. Multivariate regression model based on composite data was used to analyze the data and test the hypotheses. First, the target lever was estimated using a two-stage GMM. Then, the effect of CSR on lever adjustment speed was investigated. The findings of the present study confirm the positive effect of CSR score on lever adjustment speed. In other words, CSR has an impact on financing methods, transaction costs and leverage changes, and the results of the present study support this effect. Hypothesis testing also showed that firm size, leverage level and information asymmetry can affect the CSR relationship and leverage adjustment speed.

Keywords

References

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Financial Management Strategy
Volume 10, Issue 4 - Serial Number 39
January 2023
Pages 103-124

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History

  • Receive Date: 15 August 2021
  • Revise Date: 14 September 2022
  • Accept Date: 11 October 2022

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