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

Ariadna Dumitrescu (), Menatalla El Hefnawy and Mohammed Zakriya

Finance Research Letters, 2020, vol. 37, issue C

Abstract: Is stakeholder management crucial for financial distress? Unlike the prior literature that shows the mitigating influence of corporate social responsibility (CSR) on distress risk, we find that social stakeholder initiatives can increase the likelihood of future financial distress. Using a quasi-experiment, we find that this relationship is likely to be causal. We further show that managerial focus and financial constraints are two possible channels through which the social dimension could impact distress. Investors should hence view firms’ CSR investments with caution.

Keywords: Financial distress; Firm survival; CSR; ESG; Social performance; Corporate governance (search for similar items in EconPapers)
JEL-codes: G14 G30 M14 Q50 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:37:y:2020:i:c:s1544612319307378

DOI: 10.1016/j.frl.2019.101371

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