Investigating the Relationship between Social Responsibility and Firm Performance: The Moderating Effect of Financial Leverage

Objectives: This study aims to examine the relationship between corporate social responsibility (CSR) and firm performance, focusing on the moderating effect of financial leverage among firms listed on the Tehran Stock Exchange (TSE). CSR is viewed as a strategic managerial decision through which organizations address social and environmental issues to generate a positive impact beyond their boundaries. Methodology/Design/Approach: The study is applied in nature and adopts a causal (ex post facto) correlational design. The statistical population includes all firms listed on the TSE, from which 134 firms were selected using the systematic elimination sampling method. The research covers a ten-year period from 2015 to 2024. The study employed multiple regression analysis to test the proposed hypotheses. Findings: The results indicate a direct and significant relationship between CSR and financial performance. Moreover, financial leverage moderates this relationship, suggesting that higher debt levels can weaken or even reverse the positive impact of CSR on firm performance. Thus, while CSR contributes to enhanced firm performance, excessive leverage increases financial risk and alters this positive association. Innovation: This study contributes to the growing body of literature on CSR by providing empirical evidence from an emerging market context. It highlights how financial leverage—representing a firm’s financial risk—can shape the effectiveness of CSR in driving financial outcomes. The findings offer practical insights for managers and policymakers seeking to balance social commitments with sound financial strategies to ensure sustainable performance.