Does corporate social responsibility influence firm probability of default?

This study extends the literature on the capital structure of corporate social responsibility (CSR) firms by examining the effect of CSR on the firm probability of default using a sample of 496 firms from 17 developing countries for the period 2010–2017. This paper employs the two‐step system generalized method of moments (GMM) technique that mitigates the endogeneity problem. Our findings for the full sample show that high CSR participation reduces the firm probability of default in developing countries. Our results are robust after separating the sample into four regions. Precisely, CSR participation reduces the probability of default in Asian, Latin American, and European regions (except the African and Middle Eastern region). Overall, our findings suggest that as firms in developing countries increase their investments in CSR activities, the probability to default their obligations decreases.