Title: CSR investment and operating and financial leverage under competitive pressure

Authors: Taher Hamza; Rym Mhadhbi; Zeineb Barka

Addresses: EM Normandie Business School, Metis Laboratory, France; PRESTIGE Lab, IHEC – University of Carthage, Tunisia ' PRESTIGE Laboratory, IHEC – University of Carthage, Tunisia ' PRESTIGE Laboratory, IHEC – University of Carthage, Tunisia

Abstract: We investigate the cost of socially behaving firms and its impact on firms' operating and financial leverage. In addition, this relationship is likely to be subject to a potential moderating effect of industry competitive pressure. Using a sample of French-listed companies over 2002-2016, our empirical findings show that: 1) CSR affects positively and significantly, via social performance, the firm operating leverage (OPLEV). Environmental performance however, has no significant impact; 2) industry competition has a significant and negative impact on the association between CSR and OPLEV. In less competitive industries, CSR policy creates a competitive advantage that reduces firm's operating risk; 3) a negative effect of CSR on the financial leverage (FINLEV). Overall, our findings continue to hold after controlling for endogeneity and conducting alternative econometric specifications and have important policy implications.

Keywords: corporate social responsibility; CSR; social performance; environment performance; operating leverage; OPLEV; financial leverage; competitive pressure.

DOI: 10.1504/IJBGE.2024.139629

International Journal of Business Governance and Ethics, 2024 Vol.18 No.4/5, pp.375 - 394

Received: 22 Jun 2022
Accepted: 01 Dec 2022
Published online: 05 Jul 2024 *

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