The moderating influence of cash holdings on corporate social responsibility and financing decisions

Despite growing interest in corporate social responsibility (CSR), limited research has evaluated how cash holdings shape firms’ financing decisions. The objective of this study is to explore the effect of CSR on financing decisions with the moderating role of cash holdings. The study utilizes a sample of 522 listed non-financial firms across South Asian countries (i.e., Pakistan, Bangladesh, India, and Sri Lanka) covering the period 2010 to 2024. For data analysis, the study uses a fixed effects model as the primary approach, whereas feasible general least squares (FGLS) and generalized method of moments (GMM) estimations are utilized for robustness checks. The findings indicate that CSR activities have a significant and positive impact on financing decisions. Cash holdings are significantly and negatively associated with external debt financing. However, the results show that with greater availability of cash holdings, firms significantly reduce their reliance on external financing to perform CSR activities. These findings provide valuable insights for policymakers to support frameworks that balance CSR goals and debt financing for financial stability, while considering the role of internal funds.