Abstract

We examined the impact of corporate social responsibility (CSR) activities on the corporate financial crisis, considering the moderating effect of the corporate life cycle. This study was conducted on a sample of 2,696 company－years from 2011 to 2018, with the KEJI index as a proxy for CSR, and Z－score, K－score, KZ index, WW index, dividend payout ratio, and credit ratings for financial difficulties. We used two variants of Anthony and Ramesh (1992) and Dickinson (2011)’s life cycle variables for the corporate life cycle. The OLS regression tests showed that CSR measured by the KEJI index significantly reduced the likelihood of financial distress. This is consistent with the empirical results of previous studies that CSR reduces corporate risk and, in particular, reduces the possibility of financial hardship. Second, the reducing effect of CSR on financial distress was generally most evident in the maturity period. This confirmed our prediction that the managers’ motivation for CSR and the market’s expectations for CSR would be most significant in the maturity period. The importance of CSR is greater than ever in the modern business environment due to the effects of climate change, pandemics, and uncertainty. We believe that analysis of CSR and financial difficulties has practical utility in this respect. In addition, we believe that this study contributes to the literature in that interest in financial hardship is not as active as interest in financial performance, and few prior studies looked at the moderating effect of a company’s life cycle

Keywords

• Corporate Social Responsibility
• CSR
• Financial Distress
• Firm Life Cycle

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