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Does CSR reduce financial distress? Moderating effect of firm characteristics, auditor characteristics, and covid-19

Author

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  • Md Jahidur Rahman
  • Hongtao Zhu
  • Sihe Chen

Abstract

Purpose - This study aims to investigate the relationship between corporate social responsibility (CSR) and financial distress and the moderating effect of firm characteristics, auditor characteristics and the Coronavirus disease 2019 (Covid-19) in China. Design/methodology/approach - The research question is empirically examined on the basis of a data set of 1,257 Chinese-listed firms from 2011 to 2021. The dependent variable is financial distress risk, which is measured mainly by Z-score. CSR score is used as a proxy for CSR. Propensity score matching, two-stage least square and generalized method of moments are adopted to mitigate the potential endogeneity issue. Findings - This study reveals that CSR can reduce financial distress. Specifically, results show an inverse relationship between CSR and financial distress, more significantly in non-state-owned enterprises, firms with non-BigN auditor and during Covid-19. The results are consistent and robust to endogeneity tests and sensitivity analyses. Originality/value - This study enriches the literature on CSR and financial distress, resulting in a more attractive corporate environment, improved financial stability and more crisis-resistant economies in China.

Suggested Citation

  • Md Jahidur Rahman & Hongtao Zhu & Sihe Chen, 2023. "Does CSR reduce financial distress? Moderating effect of firm characteristics, auditor characteristics, and covid-19," International Journal of Accounting & Information Management, Emerald Group Publishing Limited, vol. 31(5), pages 756-784, September.
    • Handle: RePEc:eme:ijaimp:ijaim-04-2023-0081
    DOI: 10.1108/IJAIM-04-2023-0081
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