Purpose

This 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

The dynamic generalized method of moments (GMM) estimator is used to examine the impact of CSR on financial distress. The investment in CSR is measured 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, while the Altman Z-score is used as an indicator of financial distress. The higher the Z-score, the lower will be the probability of financial distress.

Findings

The authors find a significant positive impact of CSR on financial distress in GMM model. This finding is consistent with the shareholder view and over-investment hypothesis of CSR as management makes an investment in CSR to get personal benefits, which resultantly leads the firm toward financial distress state. Further, this positive relationship remains present for firms having strong involvement in foreign business through exports.

Research limitations/implications

Like other studies, the present study is not free from limitations. First, financial firms are 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, and this study fails to establish a linkage between CSR engagement at different stages of financial distress. In the future, researchers can make valuable addition by covering these missing links in present studies.

Practical implications

Findings suggest several practical implications. For policymakers, they should encourage firms to adopt more socially responsible behavior as it not only prevents them from distress but also comes with better investment behavior, minimize bankruptcies and make economies more strong and stable. Second, results suggest corporate managers emphasize socially responsible behavior as its benefits are beyond the “societal benefits” as it lessens financial distress through lower cost of debt, lesser financial constraints and reduced cost of information asymmetry, and it minimizes the cost of capital. Lastly, investors make risk premium assessments related to future earnings by determining the likelihood of financial distress in the future.

Originality/value

The study extends the body of existing literature on CSR and the likelihood of financial distress in Pakistan, which is according to the best knowledge of the authors, not yet studied before. The results suggest that policymakers may pay special attention to the quality of CSR while predicting corporate financial distress.

中文翻译：

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企业社会责任对财务困境的影响：来自发展中经济体的证据

目的

本研究旨在探讨 2008-2019 年 139 家巴基斯坦证券交易所 (PSX) 上市公司样本的企业社会责任 (CSR) 对财务困境可能性的影响。

设计/方法/方法

动态广义矩法 (GMM) 估计器用于检查 CSR 对财务困境的影响。企业社会责任投资通过多维度财务衡量，包括公司在慈善捐赠、员工福利、研发等方面的贡献之和，以Altman Z-score作为财务指标。苦恼。Z 分数越高，财务困境的可能性就越低。

发现

作者发现 CSR 对 GMM 模型中的财务困境有显着的积极影响。这一发现与企业社会责任的股东观点和过度投资假设一致，因为管理层投资企业社会责任以获得个人利益，从而导致公司陷入财务困境。此外，对于通过出口大力参与外国业务的公司来说，这种积极的关系仍然存在。

研究限制/影响

与其他研究一样，本研究也存在局限性。首先，样本中没有金融公司，尽管文献证明很多研究都强调金融公司对实现企业社会责任目标的承诺。其次，财务困境发生在不同阶段，本研究未能在财务困境的不同阶段建立企业社会责任参与之间的联系。未来，研究人员可以通过在目前的研究中覆盖这些缺失的环节来进行有价值的补充。

实际影响

研究结果表明了几个实际意义。对于政策制定者来说，他们应该鼓励企业采取更具社会责任感的行为，因为这不仅可以防止他们陷入困境，还可以带来更好的投资行为，最大限度地减少破产，并使经济更加强大和稳定。其次，结果表明企业管理者强调对社会负责的行为，因为其收益超出了“社会收益”，因为它通过降低债务成本、减少财务约束和降低信息不对称成本来减轻财务困境，并最大限度地降低资本成本。最后，投资者通过确定未来发生财务困境的可能性来评估与未来收益相关的风险溢价。

原创性/价值

该研究扩展了现有关于 CSR 和巴基斯坦财务困境可能性的文献，这是根据作者的最佳知识，以前尚未研究过的。结果表明，决策者在预测企业财务困境时可能会特别关注企业社会责任的质量。