Corporate social responsibility and bankruptcy
Studies in Economics and Finance
ISSN: 1086-7376
Article publication date: 19 June 2019
Issue publication date: 21 June 2019
Abstract
Purpose
This paper aims to examine corporate social responsibility (CSR) and corporate bankruptcy. Specifically, the authors ask the following research questions: Does CSR play a role in determining the likelihood of bankruptcy? Does CSR explain the difference in the probability of that firm eventually reorganizing and emerging from bankruptcy?
Design/methodology/approach
The authors address these questions by testing three CSR theories using a sample of 78 firms that filed for Chapter 11 bankruptcy during the period 2007 to 2014 along with a matched sample of firms that did not.
Findings
Overall, the findings indicate that stronger CSR firms are less likely to become bankrupt relative to weaker CSR firms, all else being equal. This result is in line with the stakeholder theory of CSR. However, results do not support the conjecture that CSR matters when it comes to bankruptcy emergence. While CSR seems to influence whether a company experiences bankruptcy in the first place, having strong CSR does not seem to help a firm once it has filed for Chapter 11.
Research limitations/implications
This paper extends the existing CSR literature but looks at CSR not from the angel of financial “success” but rather from financial “failure”.
Practical implications
The results could potentially help academics and practitioners alike in seeking understanding and reason behind CSR involvement and bankruptcy avoidance and success.
Originality/value
This is the first paper to test whether CSR plays a role in bankruptcy. The authors use a recent sample of firms with CSR scores that experienced a bankruptcy and a matched sample of CSR-scored firms that did not experience bankruptcy.
Keywords
Acknowledgements
The authors gratefully acknowledge and thank the editor and two anonymous referees for their helpful comments and suggestions.
Citation
Cooper, E. and Uzun, H. (2019), "Corporate social responsibility and bankruptcy", Studies in Economics and Finance, Vol. 36 No. 2, pp. 130-153. https://doi.org/10.1108/SEF-01-2018-0013
Publisher
:Emerald Publishing Limited
Copyright © 2019, Emerald Publishing Limited