Effects of Competition in the Product Market on the Relationship between Social Responsibility and Financial Leverage of Companies

Recent empirical findings show that product market conditions are important factors that can influence company decisions and the path to value creation. Competing in the product market as an external mechanism for corporate governance can reduce the likelihood that management use its position to engage in opportunistic behaviors and affect the company’s performance. Therefore, the main purpose of the present study is to investigate the effect of competition in the product market on the relationship between social responsibility and financial leverage in companies listed on the Tehran Stock Exchange. In order to investigate this issue, research hypotheses for 99 companies during an 8-year period from 2013 to 2020 were tested using multivariate regression models. The results of the study show that there is a negative and significant relationship between social responsibility and financial leverage of companies. Also, high competition in the product market reinforces the negative relationship between the social responsibility and financial leverage.