Do CSR performance and reporting facilitate access to debt financing in emerging markets? The role of asset structure and firm performance

Abstract

Purpose

This study aims to guide firms in emerging markets on whether corporate social responsibility (CSR) engagement facilitates their access to debt with the moderation of asset structure and firm performance. Considering the moderating effect analysis, this study explores the substitutive or complementary effect of these two contingencies on CSR-oriented firms in accessing debt financing.

Design/methodology/approach

Drawing on data collected for 16 emerging markets between 2008 and 2019, this study runs country–industry–year fixed-effects regression.

Findings

This study finds that CSR performance and reporting facilitate access to debt in emerging markets. However, CSR performance does not have an inverted U-shaped influence on firms’ access to debt financing. The moderation analysis of this study shows that asset tangibility has a negative moderating effect on the link between CSR engagements (i.e. both CSR performance and reporting) and access to debt, confirming a substitutive relationship between asset tangibility and CSR engagements in accessing debt. In contrast, firm performance is positively moderating the nexus between CSR engagement proxies and access to debt, which confirms a complementary type of relationship between firm performance and CSR engagements in accessing debt.

Practical implications

The empirical evidence of this study implies that creditors critically consider CSR engagements of firms in the loan-granting decision process. Similarly, the inverted U-shaped relationship between CSR and access to debt implies that there is an optimal level of CSR engagement creditors might consider in their decision. Likewise, the moderating effects analysis highlights that asset tangibility and firm performance are two conditions under which CSR performance and reporting are linked to access to debt.

Originality/value

Emerging countries are a different set of countries than developed ones; they have high growth rates and hence need financing, have a weaker institutional environment and have weaker stakeholder power. These particularities motivated the authors to conduct a separate study focusing on CSR and debt financing links drawing on a wide range of emerging countries. Thus, this study adds to the ongoing debate by examining the conditions under which CSR-oriented firms can access debt financing in emerging economies.

Citation

Uyar, A., Gerged, A.M., Kuzey, C. and Karaman, A.S. (2024), "Do CSR performance and reporting facilitate access to debt financing in emerging markets? The role of asset structure and firm performance", Review of Accounting and Finance, Vol. 23 No. 2, pp. 157-185. https://doi.org/10.1108/RAF-01-2023-0020