Corporate Social Responsibility (CSR) Expenditure and Debt Financing. Do the Unspent CSR Expenditure and Firm Age of Public Sector Enterprises in India Matter?

The study investigates public sector enterprises’ corporate social responsibility expenditure (spent & unspent), firm age and debt financing using signalling theory. The study employed feasible generalized least square (FGLS) and linear regression with panel-correlated standard errors (PCSE) to analyze data from 107 public sector firms with 1060 firm-year observations from 2011 to 2020. The first findings show that corporate social responsibility expenditure (spent) causes access to debt financing. The second findings show firm age causes access to debt financing (natural logarithm of total debt and total leverage ratio). The third findings show that unspent corporate social responsibility expenditure causes negative access to debt finance. The stakeholder frown on firms that do not utilize their allotted corporate social responsibility funds for the year. Lastly, firm age and not unspent corporate social responsibility expenditure positively moderate the association between corporate social responsibility expenditure and debt financing. The study is limited to firms that are central public sector undertakings and have a majority stake by the central government.