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

A. Dumitrescu; Menatalla El Hefnawy; Mohammed Zakriya

doi:10.1016/j.frl.2019.101371

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

A. Dumitrescu^*
, Menatalla El Hefnawy
, Mohammed Zakriya

^*Corresponding author for this work

Research output: Indexed journal article › Article › peer-review

21 Citations (Scopus)

4 Downloads (Pure)

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.

Original language	English
Article number	101371
Pages (from-to)	1-22
Number of pages	22
Journal	Finance Research Letters
Volume	37
DOIs	https://doi.org/10.1016/j.frl.2019.101371
Publication status	Published - Nov 2020

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

SDG 12 Responsible Consumption and Production

Keywords

CSR
Corporate governance
ESG
Financial distress
Firm survival
Social performance

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10.1016/j.frl.2019.101371

Golden Geese or Black SheepAccepted author manuscript, 348 KBLicence: CC BY-NC-ND

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title = "Golden geese or black sheep: Are stakeholders the saviors or saboteurs of financial distress?",

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{\textquoteright} CSR investments with caution.",

keywords = "CSR, Corporate governance, ESG, Financial distress, Firm survival, Social performance",

author = "A. Dumitrescu and \{El Hefnawy\}, Menatalla and Mohammed Zakriya",

note = "Funding Information: We appreciate the financial support from the Government of Spain (grants PR2015-00645 and FEDER/MICIUAEI/PGC2018-098670-B-100), the Government of Catalonia (grants 2017-SGR-640, 2018-FI\_B2-00134 and 2019-FI\_B2-00163), the European Social Fund and the {\textquotedblleft}Secretaria d{\textquoteright}Universitats i Recerca del Departament d{\textquoteright}Economia i Coneixement de la Generalitat de Catalunya{\textquotedblright}, Banc Sabadell, and La Caixa Foundation. This research was partially undertaken while Ariadna Dumitrescu was visiting the University of Maryland, for which she is very grateful. Funding Information: We appreciate the financial support from the Government of Spain (grants PR2015-00645 and FEDER/MICIUAEI/PGC2018-098670-B-100), the Government of Catalonia (grants 2017-SGR-640, 2018-FI\_B2-00134 and 2019-FI\_B2-00163), the European Social Fund and the ?Secretaria d'Universitats i Recerca del Departament d'Economia i Coneixement de la Generalitat de Catalunya?, Banc Sabadell, and La Caixa Foundation. This research was partially undertaken while Ariadna Dumitrescu was visiting the University of Maryland, for which she is very grateful. Publisher Copyright: {\textcopyright} 2019",

year = "2020",

month = nov,

doi = "10.1016/j.frl.2019.101371",

language = "English",

volume = "37",

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journal = "Finance Research Letters",

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AU - Dumitrescu, A.

AU - El Hefnawy, Menatalla

AU - Zakriya, Mohammed

N1 - Funding Information: We appreciate the financial support from the Government of Spain (grants PR2015-00645 and FEDER/MICIUAEI/PGC2018-098670-B-100), the Government of Catalonia (grants 2017-SGR-640, 2018-FI_B2-00134 and 2019-FI_B2-00163), the European Social Fund and the “Secretaria d’Universitats i Recerca del Departament d’Economia i Coneixement de la Generalitat de Catalunya”, Banc Sabadell, and La Caixa Foundation. This research was partially undertaken while Ariadna Dumitrescu was visiting the University of Maryland, for which she is very grateful. Funding Information: We appreciate the financial support from the Government of Spain (grants PR2015-00645 and FEDER/MICIUAEI/PGC2018-098670-B-100), the Government of Catalonia (grants 2017-SGR-640, 2018-FI_B2-00134 and 2019-FI_B2-00163), the European Social Fund and the ?Secretaria d'Universitats i Recerca del Departament d'Economia i Coneixement de la Generalitat de Catalunya?, Banc Sabadell, and La Caixa Foundation. This research was partially undertaken while Ariadna Dumitrescu was visiting the University of Maryland, for which she is very grateful. Publisher Copyright: © 2019

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AB - 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.

KW - CSR

KW - Corporate governance

KW - ESG

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KW - Firm survival

KW - Social performance

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JO - Finance Research Letters

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ER -

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

Abstract

UN SDGs

Keywords

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