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Corporate social responsibility and firm leverage: The impact of market competition

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  • Sheikh, Shahbaz

Abstract

This study examines the impact of market competition on the relation between CSR and firm leverage. Empirical results indicate that CSR is negatively associated with both book leverage and market leverage. However, this association is driven by competition in product markets. Specifically, CSR has a negative effect on firm leverage only when competition in product markets is high. When competition is low, CSR has no impact on firm leverage. Results also show that the impact of CSR is driven by the community, diversity, employee relations and environment dimensions of CSR and product dimension has not significant effect. Further tests also show that CSR increases firm value only when competition is high.

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  • Sheikh, Shahbaz, 2019. "Corporate social responsibility and firm leverage: The impact of market competition," Research in International Business and Finance, Elsevier, vol. 48(C), pages 496-510.
    • Handle: RePEc:eee:riibaf:v:48:y:2019:i:c:p:496-510
    DOI: 10.1016/j.ribaf.2018.11.002
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    3. Tadesse Getacher Engida & Alfons G. J. M. Oude Lansink & Xudong Rao, 2022. "A dynamic by‐production framework for measuring productivity change in the presence of socially responsible and undesirable outputs: Evidence from European food processors," Agribusiness, John Wiley & Sons, Ltd., vol. 38(2), pages 279-294, April.
    4. Ramzan, Muhammad & Amin, Muhammad & Abbas, Muhammad, 2021. "How does corporate social responsibility affect financial performance, financial stability, and financial inclusion in the banking sector? Evidence from Pakistan," Research in International Business and Finance, Elsevier, vol. 55(C).
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    More about this item

    Keywords

    Corporate social responsibility; Market competition; Book leverage; Market leverage;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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