Corporate social responsibility and firm leverage: The impact of market competition

This study examines the impact of market competition on the relation between CSR and firm leverage. Empirical results indicate that CSR is negatively associated with both book leverage and market leverage. However, this association is driven by competition in product markets. Specifically, CSR has a negative effect on firm leverage only when competition in product markets is high. When competition is low, CSR has no impact on firm leverage. Results also show that the impact of CSR is driven by the community, diversity, employee relations and environment dimensions of CSR and product dimension has not significant effect. Further tests also show that CSR increases firm value only when competition is high.