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Linking corporate social responsibility to firm default risk


  • Sun, Wenbin
  • Cui, Kexiu


Corporate social responsibility (CSR) is receiving a growing attention from both academic researchers and business managers. Prior research suggests that CSR, by its ability of building strong corporate image and reputation, effectively improves a firm’s performance. However, few studies have explored the relationship between CSR and firm risk factors. In particular, although the ongoing financial crisis spurs scholars to seek new drivers that help a firm regain its well being, an important financial indicator of a firm, default risk, has been largely neglected. This research bridges this gap and empirically examines the relationship through which CSR helps firms reduce the risk of falling into default. In addition, this paper formulates the moderating effects between CSR and firm capability, environmental dynamism/complexity, and describes a more complete pattern of CSR’s function under different internal and external conditions. The results confirm that CSR has a strong effect on default risk reduction, and this relationship is stronger on firms in high dynamism environments than in low dynamism environments.

Suggested Citation

  • Sun, Wenbin & Cui, Kexiu, 2014. "Linking corporate social responsibility to firm default risk," European Management Journal, Elsevier, vol. 32(2), pages 275-287.
  • Handle: RePEc:eee:eurman:v:32:y:2014:i:2:p:275-287
    DOI: 10.1016/j.emj.2013.04.003

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    References listed on IDEAS

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    Cited by:

    1. Thuy Thi Thu Truong & Jungmu Kim, 2019. "Do Corporate Social Responsibility Activities Reduce Credit Risk? Short and Long-Term Perspectives," Sustainability, MDPI, Open Access Journal, vol. 11(24), pages 1-16, December.
    2. Zhao, Hongyan & Zhang, Fenghua & Kwon, Jongwook, 2018. "Corporate social responsibility research in international business journals: An author co-citation analysis," International Business Review, Elsevier, vol. 27(2), pages 389-400.
    3. Pavlopoulos, Athanasios & Magnis, Chris & Iatridis, George Emmanuel, 2017. "Integrated reporting: Is it the last piece of the accounting disclosure puzzle?," Journal of Multinational Financial Management, Elsevier, vol. 41(C), pages 23-46.
    4. Pavlopoulos, Athanasios & Magnis, Chris & Iatridis, George Emmanuel, 2019. "Integrated reporting: An accounting disclosure tool for high quality financial reporting," Research in International Business and Finance, Elsevier, vol. 49(C), pages 13-40.
    5. Fabien Martinez, 2014. "Corporate strategy and the environment: towards a four-dimensional compatibility model for fostering green management decisions," Post-Print hal-02887618, HAL.
    6. Wu, Tai-Hsi & Lin, Mei-Chen, 2019. "Relationship of CEO inside debt and corporate social performance: A data envelopment analysis approach," Finance Research Letters, Elsevier, vol. 29(C), pages 308-314.
    7. Gupta, Kartick & Krishnamurti, Chandrasekhar, 2018. "Does corporate social responsibility engagement benefit distressed firms? The role of moral and exchange capital," Pacific-Basin Finance Journal, Elsevier, vol. 50(C), pages 249-262.
    8. Zerbib, Olivier David, 2019. "The effect of pro-environmental preferences on bond prices: Evidence from green bonds," Journal of Banking & Finance, Elsevier, vol. 98(C), pages 39-60.
    9. Xingqiang Du & Jianying Weng & Quan Zeng & Yingying Chang & Hongmei Pei, 2017. "Do Lenders Applaud Corporate Environmental Performance? Evidence from Chinese Private-Owned Firms," Journal of Business Ethics, Springer, vol. 143(1), pages 179-207, June.
    10. Price, Joseph M. & Sun, Wenbin, 2017. "Doing good and doing bad: The impact of corporate social responsibility and irresponsibility on firm performance," Journal of Business Research, Elsevier, vol. 80(C), pages 82-97.
    11. Lin, K.C. & Dong, Xiaobo, 2018. "Corporate social responsibility engagement of financially distressed firms and their bankruptcy likelihood," Advances in accounting, Elsevier, vol. 43(C), pages 32-45.
    12. Fabien Martinez, 2015. "A Three-Dimensional Conceptual Framework of Corporate Water Responsibility," Post-Print hal-02887624, HAL.
    13. Bert Scholtens & Sophie van’t Klooster, 2019. "Sustainability and bank risk," Palgrave Communications, Palgrave Macmillan, vol. 5(1), pages 1-8, December.
    14. Mohammad Namazi & Navid Reza Namazi, 2017. "An empirical investigation of the effects of moderating and mediating variables in business research: Insights from an auditing report," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 11(4), December.
    15. Erragragui, Elias, 2018. "Do creditors price firms’ environmental, social and governance risks?," Research in International Business and Finance, Elsevier, vol. 45(C), pages 197-207.
    16. Wei Li & Yuan Lu & Weining Li, 2019. "Does CSR Action Provide Insurance-Like Protection to Tax-Avoiding Firms? Evidence from China," Sustainability, MDPI, Open Access Journal, vol. 11(19), pages 1-19, September.
    17. Theodosios Anagnostopoulos & Antonis Skouloudis & Nadeem Khan & Konstantinos Evangelinos, 2018. "Incorporating Sustainability Considerations into Lending Decisions and the Management of Bad Loans: Evidence from Greece," Sustainability, MDPI, Open Access Journal, vol. 10(12), pages 1-16, December.


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