The impact of corporate social responsibility on financial constraints: Does the life cycle stage of a firm matter?

Based on a sample of China's Shanghai and Shenzhen A-share public firms during 2010-2016, we examine the role of a firm's life cycle stage on the relationship between corporate social responsibility (CSR) and financial constraints. After classifying firms into the initial, growth, mature, and declining stages of the life cycle, we find that for firms in the growth, mature, and declining phases of the life cycle the CSR engagement is negatively correlated with financial constraints. However, the effect of CSR relieving financial constraints is not related to firms in the initial stage of the life cycle. The results suggest that firms are not homogeneously related to the impact of CSR on financial constraints. Hence, investors can identify the firm's life cycle and take it into consideration when making decisions to minimize their investment risk. Our findings are robust using various CSR and financial constraint measurements. This study can also help regulators make more reasonable and reliable social responsibility disclosure policies appropriate for firms in different life cycle stages.