The Role of Managers' Personality Characteristics and Ownership Concentration on the Relationship between Financing Decisions and Environmental, social and Governance Performance: A Trade-off Theory Perspective

According to the trade-off theory, to determine the best combination of debt and capital before choosing a financing source, its costs and benefits should be weighed. The choice of financing type may depend on the firm's plans regarding the firm's environmental, social and governance performance, including their acceptance of such efforts and the expected benefits of the company's environmental, social and governance activities. The financing activities of the firm and the environmental, social and governance activities of the firm are affected by the characteristics of the managers and the ownership structure of the firm. Empirical investigation of this issue by focusing on the trade-off theory is the aim of the present research. Six research hypotheses were tested and analyzed using the information of 166 companies in the Tehran Stock Exchange in the period from 2013 to 2022 and using regression. The results showed that equity financing and debt financing have a positive and significant relationship with the firm's environmental, social and governance performance. Management optimism strengthens the relationship between debt financing and environmental, social and governance performance, but management myopia does not have a moderating role on this relationship. optimism Management optimism does not have a moderating role on the relationship between equity financing and environmental, social and governance performance, But management myopia weakens the relationship between equity financing and environmental, social and governance performance. Also, ownership concentration does not play a moderating role on the relationship between financing through debt and through equity with the firm's environmental, social and governance performance. The management team plays a key role in all strategic decisions, their accurate and purposeful selection according to the appropriate characteristics is one of the main factors to guarantee the firms success.