Corporate social responsibility and capital structure: Moderating effect of culture

Abstract

This paper investigates how cultural dimensions influence the relationship between corporate social responsibility (CSR) and a company's financing decisions. The study analyzes data from 780 non-financial companies over the period 2011 to 2021. We provide strong evidence that CSR activities are negatively associated with the use of debt financing. Moreover, in cultures with high power distance, masculinity, long-term orientation, indulgence, and uncertainty avoidance, intensified CSR efforts can reduce a firm's access to equity capital by decreasing informational asymmetry and agency costs. However, in more individualistic cultures, these cultural dimensions do not significantly affect the relationship between CSR and equity financing.