Rethinking Capital Structure Decision and Corporate Social Responsibility in Response to COVID-19

Accounting and Finance, Forthcoming

39 Pages Posted: 22 Mar 2021

See all articles by He Huang

He Huang

The University of Sydney, Discipline of Finance

April Ye

James Cook University - College of Business, Law and Governance,

Date Written: September 29, 2020

Abstract

COVID-19 has severely constricted the global economic activities. This paper examines the joint effect of capital structure and corporate social responsibility (CSR) activities on firm risk during COVID-19. We find that firms having excessive debt beyond the optimal level experienced high firm risk during the pandemic and the effect is more prevalent among firms with poor CSR performance. In contrast, firms with a debt level below the optimum are self-protected regardless of their CSR practices. Our study provides businesses with insights of post-pandemic directions on capital structure and CSR policies to build up sustainability and resilience in a volatile market.

Keywords: COVID-19, Capital structure, Financial risk, CSR

JEL Classification: G10, G32, G33, I10, M14

Suggested Citation

Huang, He and Ye, Ye, Rethinking Capital Structure Decision and Corporate Social Responsibility in Response to COVID-19 (September 29, 2020). Accounting and Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3808879 or http://dx.doi.org/10.2139/ssrn.3808879

He Huang

The University of Sydney, Discipline of Finance ( email )

P.O. Box H58
Sydney, NSW 2006
Australia

Ye Ye (Contact Author)

James Cook University - College of Business, Law and Governance, ( email )

Townsville
Australia

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