A CONCEPTUAL MODEL: THE IMPACT OF CORPORATE SOCIAL RESPONSIBILITY ON LEVERAGE

  • Rumana Rahman Universiti Selangor, Malaysia
  • Aza Azlina Md Kassim Universiti Selangor, Malaysia

Abstract

Bangladesh is the ruling exporter to almost all the richest buyers, brands and countries worldwide because of its cheap labor, which often facing workplace issues like low wages, health and safety issues, gender discrimination, harassment at the workplace etc. At the same time, in very recent times, Bangladesh High Court withdraws 52 substandard products from the market. The court urges the government to declare a war on products adulteration. On the other hand, recently the country encountered a huge disaster on the debt level of the companies that made business companies unable to repay their loans. Therefore, this study proposes to explore the conceptual model on the effect of workplace CSR and marketplace CSR towards company leverage. Though corporate social responsibility generates considerable interest in western countries, the concept of CSR is still poorly understood in the public sector of Bangladesh. Due to the current crisis of Bangladesh, this study incorporates two essential CSR elements namely, workplace and marketplace. In spite of considerable academic research in CSR landscape, this particular relationship not yet been established. Hence, this study provides a better and clear understanding on how the workplace CSR and marketplace CSR give impact to the leverage cost. In order to carry out the research, this study intended to collect secondary data from annual reports and conduct a questionnaire survey among the top management leaders of the public listed companies in Bangladesh. The discussions suggest the government and the regulatory bodies’ that workplace and marketplace CSR practices may reduce the debt burden of the companies. The high burden of capital structure cost may threaten the Bangladesh PLC’s to bankruptcy.

References

Bae, K.-H., Kang, J.-K., & Wang, J. (2011). Employee treatment and firm leverage: A test of the stakeholder theory of capital structure. Journal of Financial Economic, 130–153. doi:10.1016/j.jfineco.2010.10.019
Benlemlih, M. (2014, October 1). Corporate social responsibility and firm debt maturity. Journal of Business Ethics, Forthcoming. doi:10.2139/ssrn.2566890
Benlemlih, M. (2014, October 1). Why do socially responsible firms pay more dividends? Retrieved from https://ssrn.com/abstract=2566876: https://dx.doi.org/10.2139/ ssrn.2566876
Chan, L. Y. (2014). Corporate social responsibility of multinational corporations. Global Honors Theses Paper.
Cooper, E. W., & Uzun, H. (2015). Corporate social responsibility and the cost of debt. Journal of Accounting and Finance, 15, 11-29.
Dhaliwal, D. S., Li, O. Z., Tsang, A., & Yang, Y. G. (2011). Voluntary nonfinancial disclosure and the cost of equity capital: the initiation of corporate social responsibility reporting. Accounting Review, 86.
Ghoul, S. E., Guedhami, O., Kwok, C. C., & Mishra, D. R. (2011). Does corporate social responsibility affect the cost of capital? Journal of Banking & Finance, 35(9), 2388-2406.
Girerd-Potin, I., & Jimenez-Garcès, S. (2011). The link between social rating and financial capital structure. Revue de l'association française de finance, 9-52.
Guenster, N., Bauer, R., Derwall, J., & Koedijk, K. C. (2011). The economic value of corporate eco‐efficiency. European Financial Management, 679-704.
Hajiha, Z., & Sarfaraz, B. (2014). The investigation of the relationship between corporate social responsibility and debt cost in tehran stock exchange listed companies. JETAS, 95-108.
Hamid, T. (2016). Corporate social responsibility practices and disclosures of non-bank financial institutions in bangladesh. The Cost and Management, 44(1), 29-35.
Huq, S. M., Nekmahmud, M., & Aktar, M. S. (2016). Unethical practices of advertising in bangladesh: a case study on some selective products. International Journal of Economics, Finance and Management Sciences, 4, 10-19. doi:10.11648/ j.ijefm.20160401.12
Iqbal, N., Ahmad, N., Basheer, N. A., & Nadeem, M. (2012). Impact of corporate social responsibility on financial performance of corporations: evidence from pakistan. International Journal of Learning & Development, 2, 107-118. doi:10.5296/ijld.v2i6.2717
Jie, C. T., & Hasan, N. A. (2016). Determinants of Corporate Social Responsibility (CSR) and Intrinsic Job Motivation: A Case of Malaysian Banking Company. Malaysian Journal of Social Sciences and Humanities, 1(2), 25-35.
Mahbub, S., & Khan, A. H. (2015, March 08). Protecting consumer rights. The Daily Star. Retrieved from https://thedailystar.net/protecting-consumer-rights-20998
Nega, F. T. (2017). The relationship between financial performance, firm size, leverage and corporate social responsibility. Walden Dissertations And Doctoral Studies. Retrieved from Walden Dissertations And Doctoral Studies: https:// scholarworks.waldenu.edu/dissertations/4661/
Norvaisiene, R. (2012). The impact of capital structure on the performance efficiency of baltic listed companies. Inzinerine Ekonomika-Engineering Economics, 505-516.
Oikonomou, I., Brooks, C., & Pavelin, S. (2014). The effects of corporate social performance on the cost of corporate debt and credit ratings. Financial Review, 49-75. doi:10.1111/fire.12025
Riantani, S., & Nurzamzam, H. (2015). Analysis of company size, financial leverage, and profitability and its effect to csr disclosure. Jurnal Dinamika Manajemen, 203-213.
Robertson, J. A. (2017). Educating the workplace through CSR: Corporate social responsibility as the key to coordinated workplace improvemen. Annals in Social Responsibility, 3(1), 70-71. doi:10.1108/ASR-10-2017-0011
Wolska, G., & Bretyn, A. (2015). Consumer behaviour and its impact on the company’s market position in terms of corporate social responsibility. Dubrovnik International Economic Meeting, 2, 127-142. Retrieved from https://hrcak.srce.hr/161594
Zabin, I. (2013). An investigation of practicing carroll’s pyramid of corporate social responsibility in developing countries: an example of bangladesh ready-made garments. IOSR Journal of Business and Management (IOSR-JBM), 12(4), 75-81.
Zhu, C., Yang, G., An, K., & Huang, J. (2014). The leverage effect on wealth distribution in a controllable laboratory stock market. PLoS ONE, 9(6). doi:10.1371/ journal.pone.0100681
Published
2019-12-16
How to Cite
RAHMAN, Rumana; MD KASSIM, Aza Azlina. A CONCEPTUAL MODEL: THE IMPACT OF CORPORATE SOCIAL RESPONSIBILITY ON LEVERAGE. International Journal of Social Science Research, [S.l.], v. 1, n. 2, p. 69-76, dec. 2019. ISSN 2710-6276. Available at: <http://myjms.moe.gov.my/index.php/ijssr/article/view/7703>. Date accessed: 13 july 2020.
Section
Articles