Capital Structure as a Financial Constraint in the CSR–Performance Nexus: Evidence from Large UK Firms

This study re-examines the relationship between Corporate Social Responsibility (CSR) and firm performance by introducing capital structure not merely as a moderator but as a financial constraint that conditions the efficiency of CSR investments. While prior literature largely assumes that higher leverage uniformly amplifies or weakens CSR outcomes, this paper advances a more nuanced argument: CSR generates performance gains only when firms operate within an optimal financing range. Using panel data from FTSE 100 firms over 2019–2023 and fixed-effects estimation, the findings confirm a positive CSR–performance relationship. However, the interaction analysis reveals that capital structure significantly conditions this relationship, suggesting that excessive leverage constrains the strategic and reputational returns of CSR activities. By reframing capital structure as a constraint rather than a neutral moderator, this study contributes to CSR–finance literature and offers implications for sustainable corporate financing strategies in developed markets.