Golden geese or black sheep: Are stakeholders the saviors or saboteurs of financial distress?

Dumitrescu, Ariadna; Hefnawy, Menatalla El; Zakriya, Mohammed

doi:10.1016/j.frl.2019.101371

Cited by 18 publications

(9 citation statements)

References 41 publications

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“…Financial restrictions and management focus on shareholders show that businesses with shareholder-oriented managers are more prone to incur the unfavourable consequences of social stakeholder involvement in financial difficulties. Because management competence is characterised in terms of efficiency targeted at profitability, earning quality is another indicator of the same (Dumitrescu et al, 2020).…”

Section: Stakeholder's Perspectivementioning

confidence: 99%

Does being socially good save firms from bankruptcy? A systematic literature review and bibliometric analysis

Mushafiq

Prusak

2023

EiS

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The purpose of the review was to find out, does being responsible saves firms from bankruptcy? What is the relationship between corporate social responsibility and default risk? What methods and measures are used in the literature to evaluate this relationship? And what is the theoretical underpinning of the studies? Moreover, to explore what are the gaps for future work, Web of Science and Scopus databases were utilised to obtain the relevant articles for review. A total of 24 articles were reviewed using PRISMA systematic literature review and bibliometrics. This review finds that the literature has an unidirectional inverse relationship between corporate social responsibility and default risk. Moreover, most literature utilises the stakeholder perspective as the theoretical framework. A research gap exists in explaining the relationship between different theories and extending the model with various aspects of macro- and micro-economics as well as finance. This article contributes to the theoretical aspect by classifying methods, proxies, and theoretical underpinnings used in the research for corporate social responsibility and default risk.

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Section: Stakeholder's Perspectivementioning

confidence: 99%

Does being socially good save firms from bankruptcy? A systematic literature review and bibliometric analysis

Mushafiq

Prusak

2023

EiS

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“…As China's external corporate governance is not sufficiently mature, the internal governance system of listed companies is an important factor that may induce the occurrence of financial distress (Dumitrescu et al, 2020). For this paper, 14 management indicators from four aspects were collected: board structure, equity structure, internal control information, and auditors' opinions, as shown in Table 3.…”

Section: Management Indicators Of Fdpmentioning

confidence: 99%

Class‐imbalanced financial distress prediction with machine learning: Incorporating financial, management, textual, and social responsibility features into index system

Song,

Jiang,

et al. 2023

Journal of Forecasting

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Financial distress prediction (FDP) is centrally imported to reduce potential losses of companies and investors. This paper combines social responsibility indicators with financial, management, and textual indicators to construct a multi‐dimensional FDP index system. To increase prediction accuracy, the difference in the number of samples between special treatment and health companies is actively considered, and the synthetic minority oversampling technique is adopted to deal with class‐imbalanced datasets. Moreover, a feature extraction method based on the genetic algorithm is employed to select features as input of machine learning models for predicting financial distress in Chinese listed companies. Experimental results show that ensemble classifiers are the better choice for predicting financial distress, of which gradient boosting decision tree outperforms other classifiers. Textual indicators play the most significant role in complementing traditional financial indicators of FDP, and their financial distress signals emerge earlier compared with management and social responsibility indicators.

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“…Also, some studies showed a neutral and insignificant association. For example, using quasi-experiment, Dumitrescu et al (2019) examined CSR investment and financial distress likelihood. The study showed that CSR investment increases the likelihood of financial distress, whereas the distance-to-default model measures financial distress likelihood.…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

“…A Exchange and moral capital 625 study of US firms showed that CSR reduces the financial distress likelihood of firms (Mecaj and Bravo, 2014). However, other studies showed a neutral effect between CSR investment and financial distress firms (Dumitrescu et al, 2019). Management seeks antidotes to mitigate the negative effect of adverse events.…”

Section: Introductionmentioning

confidence: 99%

Exchange and moral capital of CSR disclosure and financial distress likelihood of family management firms: evidence from India

Oware

Botchway²

2022

MRR

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Purpose The purpose of this study is to examine the effect of moral and exchange capital of corporate social responsibility (CSR) disclosure on the financial distress likelihood of family management firms in India. Design/methodology/approach The constructed data set (i.e. Morgan Stanley Capital International) and Kinder, Lydenberg and Domini social performance rating data format) consists of 66 firms with 655 firm-year observations for family-managed firms that practise sustainability reporting on the Indian stock market from 2010 to 2019. Findings The first findings show that current and previous year-two CSR disclosure reduces family management firms’ financial distress. The second findings show that the exchange capital of CSR disclosure does not influence the financial distress likelihood of family management firms in India. The third findings show that moral capital of CSR disclosure of the current year, previous year-one and previous year-two more than likely reduce financial distress likelihood of family management firms in India. This study is robust due to the lagged variables of the dependent variables. Practical implications Management investment must be high in moral capital to accrue social capital, but the success is dependent on a policy of continuous support for establishing family-related businesses. Similarly, society can benefit as the firm becomes attractive to green consumers as additions to the consumers of a CSR-driven firm. The consequences can cause firms to be more philanthropic to the community. Originality/value The novelty shows that to the best of the authors’ knowledge, no studies examine CSR disclosure’s moral and exchange capital on financial distress likelihood in India. Also, there is no evidence from the perspective of family management studies in CSR-financial distress likelihood nexus.

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Golden geese or black sheep: Are stakeholders the saviors or saboteurs of financial distress?

Cited by 18 publications

References 41 publications

Does being socially good save firms from bankruptcy? A systematic literature review and bibliometric analysis

Does being socially good save firms from bankruptcy? A systematic literature review and bibliometric analysis

Class‐imbalanced financial distress prediction with machine learning: Incorporating financial, management, textual, and social responsibility features into index system

Exchange and moral capital of CSR disclosure and financial distress likelihood of family management firms: evidence from India

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