Corporate social responsibility and default risk: International evidence

Trung, K.

doi:10.1016/j.frl.2021.102063

Cited by 42 publications

(19 citation statements)

References 40 publications

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“…This significant inverse association supports Yang et al ’s (2019) theory that a corporation’s participation in CSR activities draws investment and builds favorable stakeholder relationships, hence saving the firm from FD. Furthermore, our results are compatible with those of Zheng et al (2019), Al‐Hadi et al (2017), Shahab et al (2018), Boubaker et al (2020), Do (2022) and Khan et al (2021).…”

Section: Resultssupporting

confidence: 94%

Does corporate social responsibility mediate the relationship between board diversity and financial distress: evidence from an emerging economy?

Farooq,

Khan,

Jabri

et al. 2023

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Purpose The study hypothesized that the impact of board diversity on financial distress (FD) is not direct but rather mediated by the firm’s corporate social responsibility (CSR) activities. Consequently, the purpose of this study is to examine the impact of CSR as a mediator in the board diversity–FD relationship. Design/methodology/approach The study examined six board diversity dimensions – age, gender, nationality, education and tenure in 81 nonfinancial Pakistan Stock Exchange (PSX)-listed firms from 2010 to 2021. The CSR engagement of the sample firms is evaluated using a multidimensional financial approach and the likelihood of FD is computed using Altman’s Z-score. The system-generalized method of moments estimator is used to meet the study objectives. In addition, several tests are run to determine the robustness of the study’s findings. Findings Based on the procedure for mediation analysis outlined by Baron and Kenny (1986), the authors found that CSR is significantly inversely associated with the likelihood of FD. Second, board diversity variables age, gender and national diversity were positively associated with CSR. Third, board age, gender and national diversity are significantly inversely related to FD. Finally, it was found that there is partial mediation between board age diversity and FD, whereas full mediation is shown between board age diversity and FD and between board nationality diversity and FD. Practical implications This study provides practical insights into PSX’s board diversity for companies, regulators and policymakers. Originality/value This research studies the connection between board diversity and FD. In addition, the current study extended the analysis by testing for the first time the mediating role of CSR in the diversity–distress relationship, particularly in the context of an emerging economy.

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Section: Resultssupporting

confidence: 94%

Does corporate social responsibility mediate the relationship between board diversity and financial distress: evidence from an emerging economy?

Farooq,

Khan,

Jabri

et al. 2023

View full text Add to dashboard Cite

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“…According to Albuquerque et al (2019) and Boubaker et al (2020), CSR efficiency increases business value and minimizes systemic risk. In line with the preceding arguments, Do (2022) recently empirically tested the impact of CSR activities on the likelihood of FD for a sample of 28,439 firm-year observations from 36 countries. Based on regression analysis, this study discovered that CSR is significantly inversely related to the likelihood of default.…”

Section: Literature Reviewmentioning

confidence: 87%

How does corporate social responsibility affect financial distress? The moderating role of corporate governance

Farooq

Noor

Maqbool

2023

SRJ

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Purpose This study aims to investigate the impact of corporate social responsibility (CSR) on the financial distress (FD) of firms listed on the Pakistan Stock Exchange (PSX). Furthermore, the moderating effect of corporate governance (CG) on the CSR–distress relationship is investigated in this study. Design/methodology/approach The final sample of the study includes 117 companies from 2008 to 2021. The sample firms' CSR engagement is assessed using a multidimensional financial approach, and the likelihood of FD is determined using Altman's Z-score. The governance level is measured using the governance index, which includes 29 governance provisions. To achieve the research objectives, the system generalized method of moments estimator is used. Furthermore, several tests are performed to assess the robustness of the study's findings. The analysis was carried out using STATA software version 15. Findings The authors find that CSR is significantly inversely related to FD. The governance mechanism was discovered to be inversely related to FD. Furthermore, corporate governance strengthens the negative relationship between CSR and FD. In addition, the authors find that CSR is significantly inversely related to FD in firms with strong CG mechanisms but has no effect on FD in firms with weak CG mechanisms. Practical implications The findings of this study provide policymakers, business managers, regulators and investors with a better understanding of the relationship between the quality of CSR investments and the likelihood of FD in Pakistani firms, as well as the role of CG in this context. Originality/value This study contributes to our understanding of the role of CG in the CSR-distress relationship in an emerging market. This suggests that policymakers should prioritize CG quality while anticipating the impact of CSR on corporate FD.

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“…However, the most recent ones have shifted their focus towards CSR (e.g. Hassan et al ., 2021; Li et al ., 2021; Wang et al ., 2021; Aevoae et al ., 2022; Bannier et al ., 2022; Chakraborty et al ., 2022; Do, 2022; Mefteh-Wali et al ., 2022) and accordingly theories based on stakeholder, shareholder, signalling and resource-based view have gained more prominence. In the present times, it is pertinent to communicate management's commitment and willingness towards society and stakeholders.…”

Section: Discussion and Future Directionsmentioning

confidence: 99%

Corporate governance and risk management: a systematic review and synthesis for future research

Kalia

Gill

2023

JAMR

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PurposeThe world economy has experienced several economic downturns, and each phase emphasised that no industry is immune to inappropriate risk-management practices. Against the backdrop of the recent COVID-19 pandemic, which had far more effects than a financial crisis, the existing paper reviewed the state of current research in the realm of corporate governance and risk-management practices.Design/methodology/approachThis study rigorously followed a systematic approach in identifying, selecting and critically synthesising the existing literature on corporate governance and risk management. The review was carried out on the Web of Science and Scopus database until December 31, 2022. In total, 72 research works were examined and reviewed.FindingsThis systematic literature review showed that companies with strong governance mechanisms are less exposed to corporate risks. Several attributes, such as higher institutional ownership stakes, concentrated family ownership structures, lower CEO compensation and duality, higher presence of females in the management, better board dynamics in terms of independent boards and gender diversity are all strong mechanisms for mitigating risk. Additionally, socially responsible companies are better positioned to mitigate corporate risks. Furthermore, several themes emphasising the governance risk link have been identified to understand this domain further.Originality/valueBy analysing and synthesising existing corporate governance and risk-management themes, this study ascertained various research gaps that can be addressed in future studies. Furthermore, drawing on this paper's essential cues, researchers can significantly differentiate their work from existing ones in the field.

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Corporate social responsibility and default risk: International evidence

Cited by 42 publications

References 40 publications

Does corporate social responsibility mediate the relationship between board diversity and financial distress: evidence from an emerging economy?

Does corporate social responsibility mediate the relationship between board diversity and financial distress: evidence from an emerging economy?

How does corporate social responsibility affect financial distress? The moderating role of corporate governance

Corporate governance and risk management: a systematic review and synthesis for future research

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