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

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

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.

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  • Dumitrescu, Ariadna & El Hefnawy, Menatalla & Zakriya, Mohammed, 2020. "Golden geese or black sheep: Are stakeholders the saviors or saboteurs of financial distress?," Finance Research Letters, Elsevier, vol. 37(C).
    • Handle: RePEc:eee:finlet:v:37:y:2020:i:c:s1544612319307378
    DOI: 10.1016/j.frl.2019.101371
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    More about this item

    Keywords

    Financial distress; Firm survival; CSR; ESG; Social performance; Corporate governance;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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