Exploring Leverage Differences Between Certified B Corps and Common Commercial Firms: Empirical Evidence from the United States

Researchers have documented the recent proliferation of certified B Corporations (B Corps): one form of social enterprise that experiments with balancing profitability and social missions to generate value for stakeholders, and meet rigorous ESG standards set by the B Lab. The long-term financial stability and scalability of B Corps were poorly studied as a new emerging business model, and the same for whether they can compete against common commercial firms (CCFs). 

Focusing on the public market in the United States, this paper explores: Do publicly listed certified B Corporations in the United States exhibit financial stability and capital structure differences than their common commercial peers, using leverage ratios as an important indicator. 

Analyzing panel data of the US B Corps and CCFs using a multivariate regression model while controlling for industry and year-fixed effects, I found statistically insignificant B Corp indicator coefficients for both the debt-to-asset and the debt-to-equity ratios. This suggests that B Corps may not experience significant leverage differences compared to CCFs, meaning B Corps may adopt a similar capital structure and experience similar financial stability as non-B Corps, while balancing their dual commitments to stakeholder governance and profit generation.

The result questions existing assumptions that B Corps’ stakeholder-oriented governance inherently alters financial behaviours and capital structure. Instead, the finding suggests that traditional capital structure theories remain applicable to B Corps. The finding offers insights into what business leaders may expect from obtaining the B Corps certification regarding its impact on financial stability, and financial strategy during crises like COVID-19. For investors, the finding implies that B Corps’ financial strategies and stabilities may align with conventional firms, and they should not assume B Corps’ financial strategies and stabilities are inherently different than traditional firms.