Corporate social responsibility, information asymmetry, debt maturity, and firm performance of Australian publicly listed firms

Despite the heightened interest in corporate social responsibility (CSR) in recent years, the question surrounding the impact of CSR on firm performance remains unresolved. This thesis aims at providing new insights into the CSR–firm performance research by applying a contingency perspective to investigate the relationship between CSR and its three distinct yet interrelated outcomes. The three empirical studies in this thesis explore the impact of CSR on firm performance, information asymmetry and corporate debt maturity in Australian publicly listed firms. The first study investigates the relationship between CSR and firm performance and explores how industry-specific factors may affect this link. While the last few decades have witnessed a burgeoning interest in CSR, debates surrounding its financial consequences are yet to offer firm conclusions. Consistent with the value enhancement hypothesis, this study finds a positive link between CSR and firm performance. The positive relationship is more pronounced in mining compared with non-mining firms. The financial benefits of CSR are attenuated for firms operating in more competitive industries as opposed to less competitive industries. These empirical results remain robust after controlling for sample selection bias, endogeneity and the employing of alternative variable measures and estimation methods. The second and third studies further explore possible mechanisms through which CSR affects overall firm performance. Particularly, the second study investigates the relationship between CSR and information asymmetry. This investigation extends the CSR literature by considering the impact of CSR on information asymmetry through the contingency lens. The CSR–information asymmetry association is largely overlooked in the literature, although information asymmetry is a critical factor affecting firms’ costs of capital and financial performance. Employing a fixed-effects panel estimation technique, this study shows that CSR is negatively related to information asymmetry. This negative relationship is amplified for larger firms and firms with greater market power. In contrast, the strength of CSR’s impact on information asymmetry is weaker for firms suffering from severe equity risk. These empirical results remain robust in a variety of additional tests addressing sample selection bias and endogeneity and using different variable measures. The third study investigates the relationship between CSR and debt maturity. Whereas previous CSR research has extensively discussed the role of CSR in capital markets, the impact of CSR on the maturity structure of corporate debt is relatively underexplored. In line with the conflict resolution hypothesis, this study provides empirical evidence that CSR is positively related to corporate debt maturity. Interestingly, this positive relationship is more salient for mining firms and firms with a high level of information asymmetry. A battery of additional tests indicates that the empirical evidence is not biased by sample selection, endogeneity problems or alternative variable measures. Overall, this thesis provides a better understanding of whether CSR affects firm performance by complementing the international perspective on the CSR literature, focusing on the moderating roles of important contextual factors and mechanisms linking CSR to firm performance and addressing widespread methodological concerns. The thesis findings provide important implications for different market players. First, if corporate managers pursue appropriate CSR strategies taking into account firm- and industry-specific factors, the benefits of CSR may significantly exceed the associated costs. Next, policymakers are advised to tailor to industries’ needs when designing and overseeing CSR policies. For shareholders, the thesis findings suggest that investing in stocks of CSR-conscious firms may be value-enhancing if thorough consideration is given to firm and industry characteristics.