CORPORATE SOCIAL RESPONSIBILITY AND FIRM INVESTMENT EFFICIENCY: MODERATING ROLE OF FIRM SIZE

Abstract

This research aims to evaluate the impact of corporate social responsibility (CSR) on the firm investment efficiency with moderating role of firm size. The sample is collected from companies listed on the Pakistan Stock Exchange (PSX) between 2015 and 2024. The study uses several methodological framework including pooled ordinary least square, fixed effects, two steps system generalized method of moment to test the hypotheses. The results confirm the hypothesis that corporate social responsibility (CSR) positively influences firm investment efficiency by reducing information asymmetry, in alignment with stakeholder theory. Furthermore, the moderating effect of firm size enhances the positive impact of CSR on investment efficiency, consistent with agency theory. The propensity score matching technique is used to handle endogeneity concerns. Alternative definition of investment efficiency is used to support the baseline findings. This study reveals in sub sample analysis that large size and CSR strength firms exhibit a more significant impact on the investment efficiency than small size and CSR concern firms. This study to the best of the researcher's knowledge is the first to empirically associate the impact of CSR on investment efficiency, with firm size serving as a moderating variable, in the underdeveloped market, Pakistan. The outcomes of this research may assist policymakers and practitioners in implementing CSR initiatives to enhance investment efficiency in firms.

Key Words: CSR, Investment Efficiency, Firm Size, Robustness, Endogeneity, Pakistan