The Role of Environmental and Social Responsibility in Reducing the Cost of Financing of Petrochemical Companies

Abstract

The present study aimed to investigate the role of environmental and social responsibility in reducing the cost of financing of petrochemical companies. In terms of purpose, this study was applied, and in terms of methodology, it employed a descriptive-correlational design. The statistical population consisted of all financial managers, deputy financial managers, and internal auditors of petrochemical companies listed on the Tehran Stock Exchange; according to official information, this population was estimated at 120 individuals. Using the Krejcie and Morgan table, the required sample size was determined to be 92 individuals. Following questionnaire distribution and collection, 85 completed and valid questionnaires were retained for the final analysis. The data collection instrument was a researcher-developed questionnaire based on a five-point Likert scale, with its items adapted from validated measures used in previous studies. The content validity of the questionnaire was confirmed through consultation with university professors and subject-matter experts, while construct validity, including convergent and discriminant validity, was assessed using the average variance extracted (AVE) and the Fornell–Larcker criterion. Instrument reliability was also confirmed using Cronbach’s alpha and composite reliability (CR), both of which exceeded the threshold of .70. SMART PLS 3 software and structural equation modeling (SEM) were employed to test the hypotheses and assess the fit of the conceptual model. The path analysis results indicated that all four research hypotheses were supported at the 95% confidence level, indicating that both environmental and social responsibility had positive and statistically significant effects on reducing the cost of debt financing and increasing shareholders’ equity. The findings suggest that petrochemical companies can reduce investors’ perceived risk and gain access to less expensive and more attractive sources of financing by improving their environmental and social performance.