Does corporate social responsibility reduce financial distress risk?

This study aimed to test how corporate social responsibility (CSR) can affect the impact of corporate financial distress on earnings management. Based on the existing literature, distressed firms tend to hide their financial crises through earnings manipulation. However, as CSR can positively affect companies in terms of performance, risk reduction, and market response, the better a firm’s CSR is the less managers will attempt earnings management even if they experience temporary distress. Consistent with the literature, test results using Korean-listed companies show that distress increased earnings management, and we confirmed that CSR weakened the positive effect of distress on earnings management. After testing each of the CSR subcategories, significant results were found mainly on environmental performance, reflecting the globally increasing interest in environmental issues. This study contributes to the literature on distress and earnings management, which rarely considers CSR as a moderating factor.

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Does corporate social responsibility reduce financial distress? Evidence from emerging economy

Management Science Letters ◽

10.5267/j.msl.2021.4.007 ◽

2021 ◽

Vol 11 (8) ◽

pp. 2225-2232

Author(s):

Naeem Khan ◽

Qaisar Ali Malik ◽

Ahsen Saghir ◽

Muhammad Haroon Rasheed ◽

Muhammad Husnain

Keyword(s):

Corporate Social Responsibility ◽

Social Responsibility ◽

Financial Distress ◽

Default Risk ◽

Random Effect ◽

Data Set ◽

Financial Firms ◽

Relational Behavior ◽

Corporate Social ◽

Economic Outlook

This work investigates the relational behavior of corporate social responsibility (CSR) and its effect on firms' financial distress (FD). The population of the study consists of all the non-financial firms presently listed in the equity market of Pakistan. The yearly data set of 213 non-financial companies is selected from 2005 to 2017 with total observations of 2769. The analysis of the study based on OLS regression, fixed effect, and random effect models. The study also uses the GMM technique to guard against potential problems of endogeneity and heteroskedasticity that arise from the use of panel data. Results indicate that higher investment in CSR leads to reduced/lower financial distress. It suggests that investment in CSR raises the reputation and creditworthiness of firms. Key findings are robust as confirmed by alternative proxies of financial distress. Overall findings advocate that CSR helps in reducing default risk or financial distress and creates a better corporate environment that ultimately improves organizations' economic outlook.

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Is a firm’s financial risk associated with corporate social responsibility?

Management Decision ◽

10.1108/md-02-2015-0047 ◽

2015 ◽

Vol 53 (9) ◽

pp. 2175-2199 ◽

Cited By ~ 20

Author(s):

Feng Jui Hsu ◽

Yu-Cheng Chen

Keyword(s):

Corporate Social Responsibility ◽

Social Responsibility ◽

Financial Distress ◽

Financial Risk ◽

Social Performance ◽

Earnings Forecasts ◽

Corporate Bond ◽

Fiscal Year ◽

Content Type ◽

Corporate Social

Purpose – The purpose of this paper is to examine whether socially responsible firms behave differently from other firms in terms of financial risk using US-based firms from 1991 to 2012. Design/methodology/approach – The authors used the KLD social performance rating scores as the measure of corporate social responsibility (CSR) performance and obtained an initial sample of 38,158 firm-year observations from 1991 to 2012. The authors obtained the monthly consensus earnings forecast for fiscal year one and the monthly dispersions for these earnings forecasts from I/B/E/S, and the bond spread from DataStream database. Specifically, the authors question whether firms that exhibit CSR obtain market approval to reduce financial risk, thereby providing investors and regulators with more reliable and transparent financial information, as opposed to firms that do not meet the same criteria. Findings – The authors find that social responsible firms usually perform better in terms of their credit ratings and have lower credit risk, in terms of loan spreads when compared to corporate bond spreads, and in terms of distance to default. The results control for various measurements for CSR and time periods, consider various CSR dimensions and components, and use alternative proxies to improve the quality of financial risk estimates. Originality/value – The findings demonstrate the importance of considering both positive and negative CSR performance. Positive CSR ratings are associated with reduced financial risk while negative CSR performance scores lead to increased financial distress. Investors respond to positive CSR ratings.

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Corporate social responsibility performance, financial distress and firm life cycle: evidence from Australia

Accounting and Finance ◽

10.1111/acfi.12277 ◽

2017 ◽

Vol 59 (2) ◽

pp. 961-989 ◽

Cited By ~ 29

Author(s):

Ahmed Al‐Hadi ◽

Bikram Chatterjee ◽

Ali Yaftian ◽

Grantley Taylor ◽

Mostafa Monzur Hasan

Keyword(s):

Corporate Social Responsibility ◽

Life Cycle ◽

Social Responsibility ◽

Financial Distress ◽

Firm Life Cycle ◽

Corporate Social

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Innovative Insights into Corporate Social Responsibility Dynamics

Asia Proceedings of Social Sciences ◽

10.31580/apss.v2i2.440 ◽

2018 ◽

Vol 2 (2) ◽

pp. 152-155

Author(s):

Naeem Khan ◽

Dr. Qaisar Ali Malik

Keyword(s):

Corporate Social Responsibility ◽

Social Responsibility ◽

Financial Distress ◽

Corporate Performance ◽

Recent Decade ◽

Agency Cost ◽

Investment Efficiency ◽

Mediating Role ◽

Area Of Interest ◽

Corporate Social

Corporate social responsibility and corporate performance perspectives have been focal area of interest for the researchers; and as such; it has been well explored in the literature in the recent decade (Saeidi et al., 2014). Owing to the contradictory results reported by the earlier literature; Ansong and Agyemang (2017) concluded that the reason for the conflicting results is the ignorance of some relevent mediating variables. Blasi et al. (2018) stated that the association of CSR and corporate performance is still unconcluded. As a first attempt Bitar and Belnemlih (2016) captured any possible association between CSR and investment efficiency. Moreover, CSR and Financial distress have been explored in isolation. So, there is a need to explore the relationship of CSR with Financial Distress and Financial Performance by taking into consideration the mediating role of Information Asymmetry, Agency Cost and Investment Inefficiency.

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The impact of corporate social responsibility on financial distress: empirical evidence

Social Responsibility Journal ◽

10.1108/srj-11-2020-0446 ◽

2021 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Muhammad Farooq ◽

Amna Noor ◽

Shahzadah Fahad Qureshi

Keyword(s):

Corporate Social Responsibility ◽

Social Responsibility ◽

Financial Distress ◽

Generalized Method Of Moments ◽

Z Score ◽

Content Type ◽

Financial Firms ◽

Corporate Social ◽

The Impact

Purpose The present study aims to explore the role of corporate social responsibility (CSR) on the likelihood of financial distress for a sample of 139 Pakistan Stock Exchange (PSX) listed firms throughout 2008–2019. Design/methodology/approach Panel logistic regression (PLR) and the dynamic generalized method of moments (GMM) estimator are used to examine the impact of CSR on financial distress. The investment in CSR measures through a multidimensional financial approach which comprises the sum of the contribution made by the company in the form of charitable donation, employees’ welfare and research and development, whereas the Altman Z-score and ZM-Score are used as an indicator of financial distress. The higher the Z-score lower will be the probability of financial distress, whereas the higher ZM score shows a greater probability of financial distress risk. Findings The authors find a significant negative impact of CSR on financial distress in both PLR and GMM models. This finding is consistent with the stakeholder view of CSR, as an investment in CSR not only aligns the interest between shareholders and stakeholders but also mitigates the risk of financial distress as well. Research limitations/implications Like other studies, the present study is not free from limitations. First, financial firms skipped from the sample, although literature witnesses a lot of studies highlight the financial firms' commitment to achieving CSR goals. Second, financial distress occurs in different stages, the authors fail to establish linkage CSR engagements at different stages of CSR. In the future, researchers can make a valuable addition by covering these missing links in present studies. Practical implications The findings of this study provide more insight to corporate managers and investors about the association between the quality of investment in CSR and the degree of financial distress, concerning Pakistani firms. Furthermore, this study contributes to the existing literature by adding new evidence from developing countries such as Pakistan which are helpful for regulatory bodies and policymakers in the formulation of long-term CSR strategies to manage financial distress. Originality/value The study extends the body of existing literature on CSR and the likelihood of financial distress in Pakistan. The results suggest that policymakers may pay special attention to the quality of CSR while predicting corporate financial distress.

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Do Affiliated Bankers on Board Enhance Corporate Social Responsibility? US Evidence

Sustainability ◽

10.3390/su13063250 ◽

2021 ◽

Vol 13 (6) ◽

pp. 3250

Author(s):

Iftekhar Hasan ◽

Hui Li ◽

Haizhi Wang ◽

Yun Zhu

Keyword(s):

Corporate Social Responsibility ◽

Social Responsibility ◽

Financial Distress ◽

Corporate Social Performance ◽

Social Performance ◽

Positive Influence ◽

Firm Investments ◽

Board Directors ◽

Corporate Social ◽

Csr Orientation

In this study, we examine whether and to what extent affiliated bankers on board may affect firms’ corporate social performance. Using a propensity score-matched sample from 2002 to 2016, we find that board directors from affiliated banks exert significantly positive influence on firms’ corporate social performance. Furthermore, board of directors from affiliated banks are negatively associated with firm investments in corporate social responsibility (CSR) activities when firms experience financial distress. Finally, we find that the effect of affiliated bankers on board on firms’ CSR performance depends on the affiliated banks’ CSR orientation, as affiliated banker directors from banks with higher CSR orientation have a stronger influence on firms’ investments in CSR activities. The results suggest that improving firm’s CSR performance is consistent with the affiliated banks’ interests.

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Applying the Corporate Social Responsibility to the Shipping Industry

International Journal of Accounting and Financial Reporting ◽

10.5296/ijafr.v8i1.12701 ◽

2018 ◽

Vol 8 (1) ◽

pp. 155

Author(s):

Dimitris Gavalas ◽

Theodore Syriopoulos

Keyword(s):

Corporate Social Responsibility ◽

Life Cycle ◽

Social Responsibility ◽

Financial Distress ◽

Liquidity Constraints ◽

Mature Stage ◽

Shipping Industry ◽

Corporate Social ◽

A Company ◽

Cycle Path

Corporate financial distress and cashflow liquidity constraints are seen to intensify during prolonged recessionary business cycle phases. On the other hand, companies that consistently pursue corporate social responsible strategies pay attention to smoothly cater towards their stakeholders even at harsh market times. This study investigates dynamic perspectives of corporate financial distress and social responsibility interactions, in a company life-cycle setting. The shipping industry is taken as an empirical case to study these issues at hand, based on a selected sample of 84 publicly-listed shipping companies, over 2010–2016. The empirical findings indicate that positive corporate social responsibility approaches minimize financial distress probabilities for shipping companies. Furthermore, this inverse interaction between positive corporate social responsibility and financial distress is found to be more robust for shipping companies in their mature stage of their life-cycle path.

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PENGARUH CORPORATE SOCIAL RESPONSBILITY TERHADAP FINANCIAL DISTRESS DIMODERASI OLEH SIKLUS HIDUP PERUSAHAAN PADA TAHAP MATURE

Jurnal Akuntansi ◽

10.33369/j.akuntansi.9.3.173-186 ◽

2019 ◽

Vol 9 (3) ◽

pp. 173-186

Author(s):

Retno Wati Purwaningsih ◽

Nurna Aziza

Keyword(s):

Corporate Social Responsibility ◽

Life Cycle ◽

Social Responsibility ◽

Financial Distress ◽

Stock Exchange ◽

Mature Stage ◽

Manufacturing Companies ◽

Firm Life Cycle ◽

Negative Effect ◽

Corporate Social

This research investigated to prove that corporate social responsibility has a negative effect on financial distress, and the firm life cycle at the mature stage strengthen effect of corporate social responsbility on financial distress. The populations of this study were all manufacturing companies listed on the Indonesia Stock Exchange during the years 2014-2017. Methods of data collection used purposive sampling techniques. There were 49 companies with 170 observations that fulfilled the criteria to be the study sample. This study uses a quantitative approach. Data were analyzed using logistic regression and moderated regression analysis (MRA) with the help of SPSS software. The result showed that corporate social responsibility has a negative effect on financial distress, the firm life cycle at the mature stage strengthens the effect of corporate social responsibility on financial distress. Keywords: Corporate social responsibility, Financial distress, Firm life cycle at the mature stage

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Corporate Social Responsibility, Financial Distress, Dan Siklus Hidup Perusahaan

EKONOMIS Journal of Economics and Business ◽

10.33087/ekonomis.v5i1.289 ◽

2021 ◽

Vol 5 (1) ◽

pp. 106

Author(s):

Elsa Fitri Utami ◽

Annisaa Rahman ◽

Rayna Kartika

Keyword(s):

Corporate Social Responsibility ◽

Life Cycle ◽

Social Responsibility ◽

Financial Distress ◽

Stock Exchange ◽

Life Cycle Stages ◽

Start Up ◽

Negative Effect ◽

Score Model ◽

Corporate Social

The purpose of this study is to prove that corporate social responsibility has a negative effect on financial distress and test corporate social responsibility against financial distress in different life cycle stages. Corporate social responsibility in this study measured using Global Reporting Iniative (GRI)-G4. Financial distress in this study measured using Altman’s Z-score model. This study classifies the life cycle of companies using cash flow pattern that includes phase start-up, growth, mature, and decline. The population in this study were all companies listed on the Indonesia Stock Exchange from 2014 - 2018. The sample of this study was 269 companies. Data was analyzed using logistic regression methods. The results showed that corporate social responsibility disclosure has a negative effect on financial distress. There is no evidence to support that at the start-up stage, CSR has a positive effect on financial distress. In the life cycle of the growth and mature stages, CSR has a negative and significant effect on financial distress. There is no evidence to support that at the stage of decline, CSR has a negative effect on financial distress.

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