Investigating the relationship between social responsibility and the cost of equity with regard to the mediating role of operational risk

Corporate social responsibility has become an important concern in corporate management around the world and is widely practiced in emerging markets. Therefore, by examining the economic consequences of the social responsibility activities of companies and its basic mechanisms, we can find the reason why companies pay attention to social responsibility. In this regard, this study has examined the relationship between social responsibility and the cost of equity with regard to the role of operational risk mediation. The present study is considered a correlational descriptive research. In this study, by collecting sample data including 153 companies admitted to the Tehran Stock Exchange during the period of 2012 to 2019, the relationships have been evaluated. The required data are collected from the audited financial statements and annual performance reports that are available on the Kodal website and Tehran Stock Exchange archive. In order to test the hypotheses after implementing the econometric techniques of model selection, fixed effects regression was used, and in order to test the mediation hypothesis, Baron and Kenny conditions and the Sobel test were used. Also, Evioz statistical software has been used to test the hypotheses. The findings of this study show that social responsibility has a negative and significant effect on the cost of equity and operational risk of companies, and operational risk completely and significantly mediates the effect of social responsibility on the cost of equity; This means that social responsibility leads to a reduction in the cost of equity by reducing operational risk.