Corporate social responsibility engagement of financially distressed firms and their bankruptcy likelihood

K. C. Lin, Xiaobo Dong

Research output: Contribution to journalArticlepeer-review

22 Scopus citations

Abstract

Extant literature suggests that corporate social responsibility (CSR) accrues social capitals that buffers business risk. We extend this literature by documenting that firms with higher prior history of positive CSR engagement are less likely to file for bankruptcy when they are in deep financial distress and are more likely to experience accelerated recovery from distress. Furthermore, we decompose social capitals accrued from prior CSR engagement into moral capital and exchange capital. The results show that moral capital reduces bankruptcy likelihood when the firm grows larger. On the other hand, exchange capital mitigates bankruptcy likelihood when the firm relies on intangible assets to operate and when firms operates in more litigious business environment.

Original languageEnglish
Pages (from-to)32-45
Number of pages14
JournalAdvances in Accounting
Volume43
DOIs
StatePublished - Nov 2018

Keywords

  • Bankruptcy likelihood
  • Corporate social performance
  • Corporate social responsibility
  • Distress recovery
  • ESG
  • Exchange capital
  • Financial distress
  • KLD
  • Litigation
  • MSCI
  • MSCI environment social government
  • Moral capital
  • Relationship-based intangible assets
  • Risk management

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