stock exchange
Abdolrasoul Rahmanian Koushkaki; Sohrab Vahdan Asl
Abstract
The purpose of this study is to investigate the effect of fixed asset investment and financial performance on the relationship between social responsibility and debt financing. The present study is applied and, from the methodological point of view, is a causal-correlational (post-event) study. The statistical ...
Read More
The purpose of this study is to investigate the effect of fixed asset investment and financial performance on the relationship between social responsibility and debt financing. The present study is applied and, from the methodological point of view, is a causal-correlational (post-event) study. The statistical population includes all companies listed on the Tehran Stock Exchange, and using the systematic elimination sampling method, 141 firms were selected as the research sample and studied over a 10-year period between 2014 and 2023. The findings of hypothesis testing showed that there is a direct and significant relationship between social responsibility and debt financing. Investment in fixed assets does not affect this relationship between social responsibility and debt financing, but financial performance has an inverse and significant effect on this relationship. By adhering to social responsibilities and respecting the rights of stakeholders and society, company managers can more easily access external financing by creating a better image. In addition, obtaining a higher social rank can strengthen the company's image for investors and provide greater assurance IntroductionCompanies and economic institutions need appropriate and timely financing to invest, repay debts, and increase working capital. Financial managers are always trying to increase the value of the company by creating new financing methods. Companies do not rely on only one type of resource; they try to use multiple resources to implement their plans and address their needs. Various factors can affect access to debt financing. Corporate social responsibility is one of the important issues that can influence the company's financing process. It is described as the process of creating wealth, promoting the company's competitive advantage, and maximizing the value of wealth and benefits created for society. In general, it reflects the commitment and attention of the business to the quality of life of employees, customers, the local community, and society as a whole, with the aim of developing a sustainable economy. Literature ReviewDebt financing is a more desirable solution for financing due to tax savings and its lower rate compared to the expected returns of shareholders, but what is important for creditors is the company’s repayment ability (Ebrahimi et al., 2019). Organizations should always consider themselves a part of society and have a sense of responsibility towards society. In order to improve public welfare, employees, and related stakeholders, companies should also work beyond their direct interests. A company's social responsibility focuses on important issues such as ethics, environment, security, education, and human rights (Kordestani et al., 2018). Companies with higher social responsibility can, in fact, provide a strong guarantee for debt repayment, ensure the proper functioning of the company, reduce managers' behavioral biases, and ensure the provision of accurate information by managers to the capital market. This can increase companies’ access to financing through debt (Oyar et al., 2024). Therefore, the first hypothesis of the present study is as follows:H1: Social responsibility affects access to financing through debt.Financial performance is an objective measure of how effectively an organization has used its assets to generate revenue. It is one of the most important indicators for evaluating its performance and the degree of achievement of predetermined goals (Rahimian et al., 2013). Financial performance reflects the efficiency or inefficiency of the company and can therefore influence the opinions of investors and creditors regarding the company's performance. Accordingly, the second hypothesis of the present study is as follows:H2: Investment in fixed assets affects the relationship between social responsibility and access to financing through debt.One of the fundamental variables affecting the future performance of companies, and consequently the return on their shares, is the level of investment in fixed assets. This can pave the way for achieving the desired return in the future. However, since higher investment involves greater risk, it can weaken the company's financial position, reducing its ability to maintain current returns and achieve growth in future periods. In the long run, this can also decrease the company's efficiency and performance (Oyar et al., 2024). Therefore, the third hypothesis of the present study is as follows:H3: Financial performance affects the relationship between social responsibility and access to financing through debt. MethodologyThe present study is applied and, from a methodological point of view, is causal-correlational (post-event). The statistical population includes all companies listed on the Tehran Stock Exchange, and the study period covers 2014 to 2023. The systematic elimination method was used to determine the sample, and 141 companies were selected as the research sample. Data analysis was carried out using the combined data method and the panel data approach, and Eviews 12 software was applied to test the hypotheses. ResultsThe findings from testing the research hypotheses showed that there is a direct and significant relationship between social responsibility and financing through debt. Investment in fixed assets does not affect the relationship between social responsibility and financing through debt, but financial performance has an inverse and significant effect on this relationship. By adhering to social responsibilities and respecting the rights of stakeholders and society, company managers can more easily access external financing by creating a better image. In addition, obtaining a higher social rank can strengthen the company's image for investors and provide greater assurance. DiscussionThe results showed that corporate social responsibility directly affects financing through debt. In fact, when companies adhere to social principles and responsibilities, those who extend credit to the company operate in a more favorable environment for repayment, which simplifies companies’ access to debt financing. One of the fundamental variables affecting the future performance of companies, and consequently the return on their stocks, is the level of investment in fixed assets. Such investment can pave the way for achieving desirable returns in the future, but because of the added risk it places on the company's financial position, higher investment can reduce the company's ability to maintain its current return and achieve growth in future periods. While investing in fixed assets should theoretically affect debt financing because such assets can serve as collateral, the results showed that this feature has no effect on the relationship between social responsibility and debt financing. Financial performance reflects the overall performance of the company and the profitability derived from expenses and assets. It weakens the relationship between social responsibility and debt financing. In fact, it can be interpreted that financial performance influences the relationship between social responsibility and debt financing. ConclusionThe main limitation of the present study is the lack of a comprehensive and complete index to measure the social responsibility of companies. If the Stock Exchange Organization were to provide a general measure of social responsibility through comprehensive studies, the scope of research in this field would be greatly expanded.
