CSR disclosure and debt financing in India: does CEO tenure matter?

• Published in: Journal of applied accounting research 2023-05, Vol.24 (3), p.442-463
• Main Authors: Oware, Kofi Mintah, Appiah, Kingsley, Adomah Worae, Thomas
• Format: Article
• Language: English
• Subjects: Chief executive officers; Corporate responsibility; Debt financing; Dimensional analysis; Emerging markets; Literature reviews; Long term debt; Morality; Philanthropy; Securities markets; Short term debt; Social responsibility; Stakeholders; Stock exchanges; Sustainable development; Tenure
• ISSN: 0967-5426; 1758-8855
• DOI: 10.1108/JAAR-08-2021-0204

PurposeThe study aims to examine whether corporate social responsibility (CSR) disclosure does improve debt financing of listed firms with sustainable development agendas coupled with high chief executive officer (CEO) tenure in India.Design/methodology/approachEmploying panel regression based on fixed effect and instrumental variable regression with fixed effect assumptions, the study examined data from the Bombay stock exchange from the period 2010 to 2019.FindingsThe study demonstrates that the disclosure of current exchange capital and moral capital cannot cause a firm to access short-term and long-term debt financing. However, lag investment in moral capital causes a positive effect on short-term debt financing. The second findings show that CEO tenure has a positive and statistically significant association with short-term debt financing and an insignificant association with long-term debt financing. The third findings show that the interaction of current CSR disclosure (moral and exchange capital) and CEO tenure is insignificant in affecting short-term and long-term debt finance. However, the interaction of lag CSR disclosure (moral and exchange capital) and CEO tenure positively affect short-term debt financing. The study addresses any endogeneity concerns arising from the CSR disclosure-debt financing association.Research limitations/implicationsThis study uses a single country to examine the inter-relationship between CEO tenure and debt financing and CSR measured by moral capital and exchange capital, thereby limiting the study's results for generalisation.Practical implicationsThe observation is that moral capital investment and disclosure do not guarantee new entrants the chance to access debt financing, but subsequent and lag CSR disclosure ensures access.Originality/valueNo studies examine morality from CSR disclosure on debt financing. This study shows that decoupling CSR into exchange capital and moral capital in accessing debt financing presents new inputs for scholarly debate on CSR.