CSR investment and operating and financial leverage under competitive pressure Online publication date: Fri, 05-Jul-2024
by Taher Hamza; Rym Mhadhbi; Zeineb Barka
International Journal of Business Governance and Ethics (IJBGE), Vol. 18, No. 4/5, 2024
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.
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