The Relationship Between Capital Structure and Firm Performance: Under the Moderating Role of Corporate Social Responsibility (Csr)

Abstract

This paper investigates the moderating effect of Corporate Social Responsibility (CSR) on the relationship between capital structure and firm performance on the Chinese capital market. This paper applied a panel data regression technique using data composition represented by SSE180 index for a period spanning from 2010 until 2019. A total of 86 representative large listed firms was employed in this study for the period of 10 years with a total of 860 firm-year observation. The empirical results showed that debt has a significant negative relationship with firm performance. More importantly, this paper found that the level of CSR moderates the relationship between capital structure and firm performance. The study also found that, the relationship between capital structure and firm performance diminishing when the level of CSR is higher. In China capital market context, the debt ratio is quite high and CSR is a useful business strategy that could diminish the negative impact of capital structure on firm performance. Therefore, firms should comprehensively consider relevant influencing factors, such as CSR, and apply appropriate methods in determining the optimal capital structure in improving their firm performance.