Description:
This study examines the role of corporate social responsibility (CSR) activities in a firm’s debt and equity financing decisions. We also examine the effects of CSR on the deb-equity choice for financially constrained and non-constrained firms. We find that high CSR firms tend to use more debt financing and less equity financing than low CSR firms. We also find evidence that financial constraints significantly reduce the impact of CSR on a firm’s decisions to use debt or equity financing. Taken together, our results reveal that the effect of CSR on debt-equity choices is more pronounced in financially unconstrained firms and not observed in financially constrained firms