Modelling the Relationship between the CSR Investment and the Financial Performance of Capital Constrained Firms  
Author Dinh Anh Phan

 
Co-Author(s) Thi Le Hoa Vo; Anh Ngoc Lai

 
Abstract The recognition of the corporate social responsibility (CSR) effects on firm’s financial performance has important implications for financial managers in making CSR decisions. Unfortunately, CSR has both negative and positive relationship with the financial performance in empirical findings. To provide a more nuanced explanation for the relationship between CSR and a firm's financial performance, we developed an analytical model for the impacts of CSR investment on the cost of bank loans and on the profitability of the capital constrained firms. Our analysis shows how the influence of CSR on the demand for firm’s products affects the cost of bank loans and the firm's profitability. In addition, we explore the conditions under which investing in CSR can reduce the cost of bank loans and enhance the firm profitability. The results potentially clarify the complexity of the mechanisms through which CSR affects the firm's financial performance and suggest some directions for empirical studies on this link.

 
Keywords corporate social responsibility, financial performance, default risk, bank loan, profitability
   
    Article #:  DSBFI19-18
 
Proceedings of ISSAT International Conference on Data Science in Business, Finance and Industry
July 3-5, 2019 - Da Nang, Vietnam