The moderating role of CSR in the relationship between corporate governance and capital structure: a quantile analysis of firms in a transition economy

Abstract

Purpose This study examines the simultaneous effect of corporate governance (CG) and corporate social responsibility (CSR) on capital structure (CS) and elucidates the moderating role of CSR in the relationship between CG and financial leverage, with particular emphasis on the distinctive institutional characteristics of the Iranian economy and the heterogeneous behavior of firms across varying leverage levels. Design/methodology/approach The statistical population comprises firms listed on the Tehran Stock Exchange (TSE) over the period 2015–2024, from which 1,420 firm-year observations were retained after applying systematic screening criteria. The CG index was constructed based on four structural components, while CSR was measured through content analysis employing a three-dimensional disclosure checklist encompassing social, economic and environmental dimensions. To capture distributional heterogeneity in the effects, quantile regression (QR) was employed. Findings The findings indicate that CG exerts a positive and statistically significant effect on financial leverage, whereas CSR has a negative and significant influence. Moreover, the interaction term between CG and CSR is negative and significant, demonstrating that CSR weakens the positive impact of CG on debt usage. The QR results further reveal that these effects are more pronounced at lower leverage levels and gradually diminish in highly leveraged firms, highlighting asymmetric behavioral patterns across the leverage distribution. Originality/value By integrating a multilevel perspective with QR, this study introduces a novel analytical framework for explaining the complex interaction between CG, CSR and CS in transition economies and contributes to the advancement of sustainable finance literature in emerging institutional contexts.