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Corporate Sustainability, Multi-layered Governance and the Financial Distress Likelihood Worldwide
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Corporate Sustainability, Multi-layered Governance and the Financial Distress Likelihood Worldwide

A special issue of Journal of Risk and Financial Management (ISSN 1911-8074). This special issue belongs to the section "Sustainability and Finance".

Deadline for manuscript submissions: closed (20 July 2023) | Viewed by 16048

Special Issue Editors

Dr. Ali Meftah Gerged

E-Mail Website
Guest Editor
Faculty of Business and Law, Leicester Castle Business School, De Montfort University, The Gateway, Leicester LE1 9BH, UK
Interests: sustainability; accountability; governance
Special Issues, Collections and Topics in MDPI journals
Prof. Dr. Collins Ntim

E-Mail Website
Guest Editor
Centre for Research in Accounting, Accountability and Governance (CRAAG), University of Southampton, Southampton SO17 1BJ, UK
Interests: accounting, finance, governance, development and sustainability; accounting and governance (corporate governance and financial reporting, market-based accounting research); accountability, ethics, and sustainability (social and environmental accounting, corporate social responsibility, and sustainability accounting and reporting); finance and development (corporate finance, market-based finance research and financial economics, development finance)
Special Issues, Collections and Topics in MDPI journals

Special Issue Information

Dear Colleagues,

The rapid growth of the socially responsible investment (SRI) market during the last 20 years has contributed to the integration of sustainability performance (proxied by the Environmental, Social, and Governance (ESG) score) into traditional asset management (Cellier and Chollet, 2016; Gray, 2002; Von Wallis and Klein, 2015). According to the Global Sustainable Investment Alliance (2018), the total assets allocated to SRI strategies recorded $30.7 trillion internationally at the beginning of 2018, with a 34% rise since 2016. The assets’ value that was managed after checking for negative ESG issues scored $19.77 trillion, although the value of assets that include ESG-related elements into the financial analysis recorded around $17.54 trillion in 2018. This highlights the significance of sustainability practices as a valuable asset that can effectively enhance firms’ legitimacy and survival prospects in the future (Cho and Patten, 2007; Deegan, 2014; Gerged, Beddewela and Cowton, 2021).

Given this global pressure/concern on sustainability, it is essential to understand the relationships among sustainability performance/reporting (ESG), corporate governance (CG), national governance (NG), and Financial Distress likelihood (FDL). However, such attempts are still relatively rare (Shahab, Ntim, Chengang, Ullah, and Fosu, 2018; Mangena, Priego, and Manzaneque, 2020), except for a few. For example, Shahab et al. (2018) provided empirical evidence suggesting that increased environmental performance driven by good environmental policies strategically reduces the probabilities of financial distress incidence. Similarly, Mangena et al. (2020) investigated the effects of CG structures, including bank power, block ownership, and board independence, on the likelihood of financial distress. However, to date, the question of whether multilayered governance, including CG mechanisms and global governance indicators, affect the ESG–FDL nexus in an international context remained unanswered.

Therefore, this Special Issue focuses on establishing a robust link between sustainability performance/reporting and FDL in a global context. Suitable topics include but are not limited to the following:

  • Examining the impact of sustainability performance (ESG) on financial distress likelihood internationally;
  • Exploring the moderating impact of corporate governance on the association between sustainability reporting and firms’ financial distress;
  • Understanding the impact of multilayered governance, including corporate governance and national-level governance, on financial distress likelihood;
  • Examining whether the impact of sustainability performance/reporting on firms’ financial distress likelihood is contingent on the control of corruption and government effectiveness;
  • Determining whether national governance can affect the association between corporate governance and sustainability performance/reporting internationally;
  • Examining whether national governance moderates the impact of corporate governance on financial distress likelihood through sustainability performance.

References:

Cellier, A., & Chollet, P. (2016). The effects of social ratings on firm value. Research in International Business and Finance, 36, 656–683.

Cho, C. H., & Patten, D. M. (2007). The role of environmental disclosures as tools of legitimacy: A research note. Accounting, Organizations and Society, 32(7-8), 639-647.

Deegan, C. (2014). An overview of legitimacy theory as applied within the social and environmental accounting literature. Sustainability Accounting and Accountability, 266-290.

Gerged, A. M., Beddewela, E., & Cowton, C. J. (2021). Is corporate environmental disclosure associated with firm value? A multicountry study of Gulf Cooperation Council firms. Business Strategy and the Environment, 30(1), 185-203.

Global Sustainable Investment Alliance (2018). 2018 global sustainable investment review. Global Sustainable Investment Alliance, www.gsialliance.org

Gray, R. (2002). The social accounting project and Accounting Organizations and Society Privileging engagement, imaginings, new accountings and pragmatism over critique?. Accounting, Organizations and Society, 27(7), 687-708.

Mangena, M., Priego, A. M., & Manzaneque, M. (2020). Bank power, block ownership, boards and financial distress likelihood: An investigation of Spanish listed firms. Journal of Corporate Finance, 64, 101636.

Shahab, Y., Ntim, C., Chengang, Y., Ullah, F., & Fosu, S. (2018). Environmental policy, environmental performance, and financial distress in China: Do top management team characteristics matter?. Business Strategy and the Environment, 27(8), 1635-1652.

Von Wallis, M., & Klein, C. (2015). Ethical requirement and financial interest: A literature review on socially responsible investing. Business Research, 8, 61–98.

Dr. Ali Meftah Gerged
Prof. Dr. Collins Ntim
Guest Editors

Manuscript Submission Information

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Please visit the Instructions for Authors page before submitting a manuscript. The Article Processing Charge (APC) for publication in this open access journal is 1400 CHF (Swiss Francs). Submitted papers should be well formatted and use good English. Authors may use MDPI's English editing service prior to publication or during author revisions.

Keywords

  • corporate sustainability performance
  • corporate sustainability disclosure ESG score
  • corporate governance mechanisms
  • global governance indicators
  • financial distress likelihood

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Published Papers (4 papers)

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Research

19 pages, 2130 KiB  
Article
The Internal Determinants of Gender Diversity and Its Non-Linear Impact on Firms’ Performance: Evidence from the Listed Companies in Palestine Exchange
by Abdelrahman J. K. Alfar, Nariman Abuatwan, Mohamed Elheddad and Mohammad Qaki
J. Risk Financial Manag. 2023, 16(1), 28; https://doi.org/10.3390/jrfm16010028 - 4 Jan 2023
Cited by 2 | Viewed by 2824
Abstract
This study mainly aims to test the impact of gender diversity on a firm’s performance. Namely, the non-linear and the quantile impact on the listed companies in Palestine Exchange during the period 2010 to 2020. The study also aims to determine the impact [...] Read more.
This study mainly aims to test the impact of gender diversity on a firm’s performance. Namely, the non-linear and the quantile impact on the listed companies in Palestine Exchange during the period 2010 to 2020. The study also aims to determine the impact of a firm’s internal characteristics on gender diversity. The study uses instrument analysis, traditional panel models, and quantile regression to fulfil the aims. The results demonstrate the existence of a critical mass for the impact of gender diversity on firms’ performance and that mass is about 30% for the ROA and 41% for the EPS. Full article
(This article belongs to the Special Issue Corporate Sustainability, Multi-layered Governance and the Financial Distress Likelihood Worldwide)
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22 pages, 431 KiB  
Article
Estimating the Risk of Financial Distress Using a Multi-Layered Governance Criterion: Insights from Middle Eastern and North African Banks
by Ali Meftah Gerged, Mohamed Marie and Israa Elbendary
J. Risk Financial Manag. 2022, 15(12), 588; https://doi.org/10.3390/jrfm15120588 - 7 Dec 2022
Cited by 1 | Viewed by 1946
Abstract
In this study, we explored the association of bank-level governance and state-level governance with the likelihood of banks’ financial distress in developing economies. Using a panel data sample of 954 bank-year observations of 106 conventional banks across 14 Middle Eastern and North African [...] Read more.
In this study, we explored the association of bank-level governance and state-level governance with the likelihood of banks’ financial distress in developing economies. Using a panel data sample of 954 bank-year observations of 106 conventional banks across 14 Middle Eastern and North African (MENA) countries from 2010 to 2018, we found that bank governance arrangements seemed to be negatively attributed to the probability of financial distress. We also found that the relationship of political stability with financial distress prospects is—contrary to our expectation—insignificant, whereas government effectiveness negatively influences the likelihood of financial distress. Our empirical evidence offers practical implications for bank managers, regulators, and credit rating agencies, and suggests several future research avenues that can build on our findings. Full article
(This article belongs to the Special Issue Corporate Sustainability, Multi-layered Governance and the Financial Distress Likelihood Worldwide)
18 pages, 338 KiB  
Article
Corporate Social Responsibility and Capital Allocation Efficiency in Australia and New Zealand
by Alexandre Garel, Alireza Tourani-Rad and Shengze Xu
J. Risk Financial Manag. 2022, 15(3), 100; https://doi.org/10.3390/jrfm15030100 - 23 Feb 2022
Cited by 2 | Viewed by 3293
Abstract
In this paper, we investigate whether a firm’s Corporate Social Responsibility initiatives could affect its financial performance. We specifically investigate the firm’s capital allocation efficiency as a moderating channel affecting their performance. We employ a comprehensive sample of Australian and New Zealand stock [...] Read more.
In this paper, we investigate whether a firm’s Corporate Social Responsibility initiatives could affect its financial performance. We specifically investigate the firm’s capital allocation efficiency as a moderating channel affecting their performance. We employ a comprehensive sample of Australian and New Zealand stock exchange-listed firms consisting of 3324 firm-year observations for the period 2004–2017. We do not find that the firm’s capital allocation efficiency is negatively affected by the overall CSR scores or its two main components, namely the environmental or social dimensions. However, our empirical analysis exposes a challenging result for the firms in that we find strong evidence that extremely costly environmental CSR initiatives or policies (e.g., emission reduction, employee health and safety improvements, clean energy products) could reduce the firm’s investment efficiency. Hence, firms need to follow a balancing act when contemplating CSR plans and investing in them. While investors appreciate moderate levels of investment in CSRs, they penalize those firms that invest excessively in such initiatives. Full article
(This article belongs to the Special Issue Corporate Sustainability, Multi-layered Governance and the Financial Distress Likelihood Worldwide)
17 pages, 679 KiB  
Article
The Impact of Corporate Social Responsibility as a Marketing Investment on Firms’ Performance: A Risk-Oriented Approach
by Mohamed M. Ibrahim, Mohamed M. El Frargy and Khaled Hussainey
J. Risk Financial Manag. 2021, 14(11), 515; https://doi.org/10.3390/jrfm14110515 - 27 Oct 2021
Cited by 5 | Viewed by 5346
Abstract
In light of the growing interest in corporate social responsibility (CSR), there is still controversy regarding its impact on firms’ performance. In this paper, we examine the impact of CSR initiatives, as a marketing investment, on firms’ performance. We treat CSR initiatives as [...] Read more.
In light of the growing interest in corporate social responsibility (CSR), there is still controversy regarding its impact on firms’ performance. In this paper, we examine the impact of CSR initiatives, as a marketing investment, on firms’ performance. We treat CSR initiatives as investment and, consequently, the returns appear over the long term. We use the stochastic frontier analysis (SFA) approach which is a forward-looking financial market-based metric that captures the firm’s long-term performance. We focus on the banking industry as it confronts a variety compound of risk. We find that CSR implementation is positively reflected in profit efficiency, regardless of the strategic commitment to implementing CSR and bank size, as these variables do not influence the CSR–performance relationship. However, we find that bank age and competitive positioning have a significant impact on the CSR–performance relationship. Our study provides valuable insights to CSR practitioners and researchers, especially in the banking sector. We provide empirical evidence on the importance of CSR and its positive impact on bank performance in Egypt as one of the emerging markets. Full article
(This article belongs to the Special Issue Corporate Sustainability, Multi-layered Governance and the Financial Distress Likelihood Worldwide)
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