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Liquidity and CSR: a chicken and egg story

Ali Uyar (Excelia Business School, Excelia Group, La Rochelle, France)
Muath Abdelqader (College of Business, Australian University, Kuwait, Kuwait)
Cemil Kuzey (Arthur J. Bauernfeind College of Business, Murray State University, Murray, Kentucky, USA)

Society and Business Review

ISSN: 1746-5680

Article publication date: 15 August 2022

Issue publication date: 2 February 2023




Drawing on financial slack resources theory, stakeholder theory and signaling theory, the purpose of this study is to explore the two-way causality between liquidity and corporate social responsibility (CSR) by using the cash conversion cycle (CCC) as liquidity proxy and composite and individual CSR metrics.


The data were retrieved from the Thomson Reuters Eikon database covering the period between 2013 and 2019 and 20,016 firm-year observations affiliated with ten business sectors and 60 countries. The fixed-effects panel regression analysis is executed in the empirical part.


The results indicate that firms with greater liquidity proxied by shorter CCC engage with greater CSR initiatives. They also reveal that firms with greater liquidity proxied by CCC do not regard all the dimensions of environmental and social performance equivalently; they do discriminate them. In the environmental pillar, firms funnel their cash derived from shorter CCC toward eco-innovation and resource use, respectively, but not to emissions reduction. In the social pillar, higher liquidity fosters community and human rights dimensions, respectively, but not workforce and product quality. These outcomes are largely robust to alternative CSR measurement, alternative sampling and endogeneity concerns. The reverse causality confirmed that CSR promotes higher liquidity (shorter CCC). Thus, the bidirectional relationship between CSR and liquidity is confirmed.

Research limitations/implications

Although the authors wanted to consider a longer study period, they were obliged to choose 2013 as the starting period because particularly CCC data together with environmental, social and governance (ESG) data were not available in the earlier years.

Practical implications

Among environmental indicators, fueling eco-innovation most with greater liquidity shows that firms make a strategic choice for their long-term growth and legitimacy. Besides, greater liquidity induces greater community development and more respect for human rights rather than investing in workforce and product quality. Although this might be an outcome of the realization of a deliberate strategy and good for the society, not investing in the workforce and product quality may impair the long-term survival and competitive position of the firm in the long-run in the marketplace. The implication of reverse causality is that customers purchase products and services of firms that do good for the ecology and the community and they pay faster to those companies.

Social implications

This study highlights that liquidity management and CSR are closely interrelated confirming a chicken and egg story. Firms with better liquidity management are more likely to care environment and community. Besides, doing good for society pays back in the form of enhanced firm liquidity triggering customer sympathy.


This research provides new insight by examining the two-way causality of the relationship between CSR performance and liquidity, which helps highlight the impact of CSR performance on the company’s ability to manage its cash and the benefits of having high liquidity on enhancing the company’s concern about the society and environment.



Uyar, A., Abdelqader, M. and Kuzey, C. (2023), "Liquidity and CSR: a chicken and egg story", Society and Business Review, Vol. 18 No. 1, pp. 124-151.



Emerald Publishing Limited

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