Volume 13, Issue 5 (May 2026), Pages: 1-10

----------------------------------------------

 Original Research Paper

Does CSR disclosure mitigate financial distress? Evidence from Indonesian manufacturers and the COVID-19 shock

 Author(s): 

Nguyen Bich Ngoc ^1, *, Luong Viet Phuong ², Phung Huu Quan ³

 Affiliation(s):

¹Banking Faculty, Banking Academy of Vietnam, Hanoi, Vietnam
²R&D Resource Platform, U01A Business Group, Goertek Technology Vina Company Limited, Bac Ninh, Vietnam
³Universal Banker, Customer Service Department, Vietnam Technological and Commercial Joint Stock Bank, Hanoi, Vietnam

 Full text

    Full Text - PDF

 * Corresponding Author. 

   Corresponding author's ORCID profile:  https://orcid.org/0000-0003-2069-8285

 Digital Object Identifier (DOI)

 
https://doi.org/10.21833/ijaas.2026.05.001

 Abstract

This study examines whether corporate social responsibility disclosure (CSRD) reduces financial distress and whether this effect becomes stronger during a systemic shock. Using panel data from 21 Indonesian manufacturing firms over the period 2017–2020, financial distress is measured by the Altman Z-score. The analysis applies pooled ordinary least squares (OLS), random-effects, fixed-effects, and feasible generalized least squares (GLS) models, including an interaction term between CSRD and the COVID-19 period. The results show that in non-crisis years, higher CSRD is associated with lower Z-scores, suggesting the presence of short-term compliance and implementation costs. However, during the COVID-19 period, the interaction term between CSRD and COVID-19 is positive and statistically significant, indicating that CSRD improves Z-scores and reduces financial distress when shocks occur. This study contributes firm-level evidence from an emerging market and highlights a crisis-dependent effect of CSRD, helping to explain inconsistent findings in previous studies. The results suggest that firms can enhance resilience by investing in credible disclosure systems, while policymakers can support financial stability by encouraging transparent sustainability reporting, particularly during economic downturns.

 © 2026 The Authors. Published by IASE.

 This is an open access article under the CC BY-NC-ND license (https://creativecommons.org/licenses/by-nc-nd/4.0/).

 Keywords

Corporate social responsibility disclosure, Financial risk distress, Manufacturing companies, Indonesia

 Article history

Received 20 November 2025, Received in revised form 16 April 2026, Accepted 30 April 2026

 Acknowledgment

The authors gratefully acknowledge the financial support from the Banking Academy of Vietnam. 

 Compliance with ethical standards

 Citation:

Ngoc NB, Phuong LV, and Quan PH (2026). Does CSR disclosure mitigate financial distress? Evidence from Indonesian manufacturers and the COVID-19 shock. International Journal of Advanced and Applied Sciences, 13(5): 1-10

  Permanent Link to this page

---------------------------------------------- 

 References (42)

1. Altman EI, Hotchkiss E, and Wang W (2019). Corporate financial distress, restructuring, and bankruptcy: Analyze leveraged finance, distressed debt, and bankruptcy. 4th Edition, Wiley, Hoboken, USA. https://doi.org/10.1002/9781119541929   [Google Scholar]
2. Archel P, Husillos J, Larrinaga C, and Spence C (2009). Social disclosure, legitimacy theory and the role of the state. Accounting, Auditing & Accountability Journal, 22(8): 1284-1307. https://doi.org/10.1108/09513570910999319   [Google Scholar]
3. Attig N, Cleary S, El Ghoul S, and Guedhami O (2013). Institutional investment horizons and the cost of equity capital. Financial Management, 42(2): 441-477. https://doi.org/10.1111/j.1755-053X.2012.01221.x   [Google Scholar]
4. Aula R, Sumiyati S, and Mai MU (2022). The effect of corporate social responsibility disclosure on the performance of Islamic banks in Indonesia. Jurnal Manajemen Bisnis, 13(1): 93–107. https://doi.org/10.18196/mb.v13i1.12832   [Google Scholar]
5. Aupperle KE, Carroll AB, and Hatfield JD (1985). An empirical examination of the relationship between corporate social responsibility and profitability. Academy of Management Journal, 28(2): 446-463. https://doi.org/10.2307/256210   [Google Scholar]
6. Bernardi C and Stark AW (2018). Environmental, social and governance disclosure, integrated reporting, and the accuracy of analyst forecasts. The British Accounting Review, 50(1): 16-31. https://doi.org/10.1016/j.bar.2016.10.001   [Google Scholar]
7. Boubaker S, Cellier A, Manita R, and Saeed A (2020). Does corporate social responsibility reduce financial distress risk? Economic Modelling, 91: 835-851. https://doi.org/10.1016/j.econmod.2020.05.012   [Google Scholar]
8. Cahyaningsih C and Septyaweni A (2022). Corporate social responsibility disclosure before and during the COVID-19 pandemic. Jurnal Akuntansi dan Auditing Indonesia, 26(1): 11-22. https://doi.org/10.20885/jaai.vol26.iss1.art2   [Google Scholar]
9. Deegan C and Rankin M (1996). Do Australian companies report environmental news objectively? An analysis of environmental disclosures by firms prosecuted successfully by the Environmental Protection Authority. Accounting, Auditing & Accountability Journal, 9(2): 50-67. https://doi.org/10.1108/09513579610116358   [Google Scholar]
10. Deegan C and Soltys S (2007). Social accounting research: An Australasian perspective. Accounting Forum, 31(1): 73-89. https://doi.org/10.1016/j.accfor.2006.11.001   [Google Scholar]
11. Deegan C, Rankin M, and Tobin J (2002). An examination of the corporate social and environmental disclosures of BHP from 1983‐1997: A test of legitimacy theory. Accounting, Auditing & Accountability Journal, 15(3): 312-343. https://doi.org/10.1108/09513570210435861   [Google Scholar]
12. Deegan C, Rankin M, and Voght P (2000). Firms' disclosure reactions to major social incidents: Australian evidence. Accounting Forum, 24(1): 101-130. https://doi.org/10.1111/1467-6303.00031   [Google Scholar]
13. Dhaliwal D, Li OZ, Tsang A, and Yang YG (2014). Corporate social responsibility disclosure and the cost of equity capital: The roles of stakeholder orientation and financial transparency. Journal of Accounting and Public Policy, 33(4): 328-355. https://doi.org/10.1016/j.jaccpubpol.2014.04.006   [Google Scholar]
14. Dirman A (2020). Financial distress: The impacts of profitability, liquidity, leverage, firm size, and free cash flow. International Journal of Business, Economics and Law, 22(1): 17-25.   [Google Scholar]
15. Freeman RE (2010). Strategic management: A stakeholder approach. Cambridge University Press, Cambridge, UK. https://doi.org/10.1017/CBO9781139192675[Google Scholar]
16. Huang H and Ye Y (2021). Rethinking capital structure decision and corporate social responsibility in response to COVID‐19. Accounting & Finance, 61(3): 4757-4788. https://doi.org/10.1111/acfi.12740   [Google Scholar]
17. Jiraporn P, Jiraporn N, Boeprasert A, and Chang K (2014). Does corporate social responsibility (CSR) improve credit ratings? Evidence from geographic identification. Financial Management, 43(3): 505-531. https://doi.org/10.1111/fima.12044   [Google Scholar]
18. Karamzadeh MS (2013). Application and comparison of Altman and Ohlson models to predict bankruptcy of companies. Research Journal of Applied Sciences, Engineering and Technology, 5(6): 2007-2011. https://doi.org/10.19026/rjaset.5.4743   [Google Scholar]
19. Laksmi AC and Hasri AP (2022). Influence of Corporate Social Responsibility Disclosure on financial performance of manufacturing companies listed on Indonesia Stock Exchange. Jurnal Akuntansi dan Auditing Indonesia, 26(1): 102-109. https://doi.org/10.20885/jaai.vol26.iss1.art10   [Google Scholar]
20. Lindblom CK (1994). The implications of organizational legitimacy for corporate social performance and disclosure. In the Critical Perspectives on Accounting Conference, Scientific Research Publishing, Wuhan, China.   [Google Scholar]
21. Lins KV, Servaes H, and Tamayo A (2017). Social capital, trust, and firm performance: The value of corporate social responsibility during the financial crisis. The Journal of Finance, 72(4): 1785-1824. https://doi.org/10.1111/jofi.12505   [Google Scholar]
22. Masdupi E, Tasman A, and Davista A (2018). The influence of liquidity, leverage and profitability on financial distress of listed manufacturing companies in Indonesia. In the Proceedings of the First Padang International Conference on Economics Education, Economics, Business and Management, Accounting and Entrepreneurship (PICEEBA 2018), Atlantis Press, Paris, France: 389–394. https://doi.org/10.2991/piceeba-18.2018.51   [Google Scholar]
23. Miglani S, Ahmed K, and Henry D (2015). Voluntary corporate governance structure and financial distress: Evidence from Australia. Journal of Contemporary Accounting & Economics, 11(1): 18-30. https://doi.org/10.1016/j.jcae.2014.12.005   [Google Scholar]
24. Milne MJ and Patten DM (2002). Securing organizational legitimacy: An experimental decision case examining the impact of environmental disclosures. Accounting, Auditing & Accountability Journal, 15(3): 372-405. https://doi.org/10.1108/09513570210435889   [Google Scholar]
25. Mishra S and Modi SB (2013). Positive and negative corporate social responsibility, financial leverage, and idiosyncratic risk. Journal of Business Ethics, 117: 431-448. https://doi.org/10.1007/s10551-012-1526-9   [Google Scholar]
26. Mittal RK, Sinha N, and Singh A (2008). An analysis of linkage between economic value added and corporate social responsibility. Management Decision, 46(9): 1437-1443. https://doi.org/10.1108/00251740810912037   [Google Scholar]
27. Moneva JM, Rivera‐Lirio JM, and Muñoz‐Torres MJ (2007). The corporate stakeholder commitment and social and financial performance. Industrial Management & Data Systems, 107(1): 84-102. https://doi.org/10.1108/02635570710719070   [Google Scholar]
28. Nurfadila N and Sukmayanti S (2020). Does CSRD and GCG moderate the effect of financial performance on stock return? Atestasi: Jurnal Ilmiah Akuntansi, 3(2): 133–141. https://doi.org/10.57178/atestasi.v3i2.262   [Google Scholar]
29. O’Dwyer B (2002). Managerial perceptions of corporate social disclosure: An Irish story. Accounting, Auditing & Accountability Journal, 15(3): 406-436. https://doi.org/10.1108/09513570210435898   [Google Scholar]
30. Oeyono J, Samy M, and Bampton R (2011). An examination of corporate social responsibility and financial performance: A study of the top 50 Indonesian listed corporations. Journal of Global Responsibility, 2(1): 100-112. https://doi.org/10.1108/20412561111128555   [Google Scholar]
31. Platonova E, Asutay M, Dixon R, and Mohammad S (2018). The impact of corporate social responsibility disclosure on financial performance: Evidence from the GCC Islamic banking sector. Journal of Business Ethics, 151: 451-471. https://doi.org/10.1007/s10551-016-3229-0   [Google Scholar]
32. Razafindrambinina D and Sabran A (2014). The impact of strategic corporate social responsibility on operating performance: an investigation using data envelopment analysis in Indonesia. Journal of Business Studies Quarterly, 6(1): 68-78.  [Google Scholar]
33. Rosser A and Edwin D (2010). The politics of corporate social responsibility in Indonesia. The Pacific Review, 23(1): 1-22. https://doi.org/10.1080/09512740903398314   [Google Scholar]
34. Tao Q, Liu M, Feng Q, and Zhu Y (2018). How do institutional investors affect corporate performance? Evidence from private placements in China. Emerging Markets Finance and Trade, 54(15): 3454-3469. https://doi.org/10.1080/1540496X.2018.1426456   [Google Scholar]
35. Tarighi H, Appolloni A, Shirzad A, and Azad A (2022). Corporate social responsibility disclosure (CSRD) and financial distressed risk (FDR): does institutional ownership matter? Sustainability, 14(2): 742. https://doi.org/10.3390/su14020742   [Google Scholar]
36. Thuy CTM, Khuong NV, and Liem NT (2021). Corporate social responsibility disclosure and its effect on firm risk: An empirical research on Vietnamese firms. Sustainability, 13(22): 12933. https://doi.org/10.3390/su132212933   [Google Scholar]
37. Tsouknidis DA (2019). The effect of institutional ownership on firm performance: The case of US-listed shipping companies. Maritime Policy & Management, 46(5): 509-528. https://doi.org/10.1080/03088839.2019.1584408   [Google Scholar]
38. Vagin SG, Kostyukova EI, Spiridonova NE, and Vorozheykina TM (2022). Financial risk management based on corporate social responsibility in the interests of sustainable development. Risks, 10(2): 35. https://doi.org/10.3390/risks10020035   [Google Scholar]
39. Waddock SA and Graves SB (1997). The corporate social performance–financial performance link. Strategic Management Journal, 18(4): 303-319. https://doi.org/10.1002/(SICI)1097-0266(199704)18:4<303::AID-SMJ869>3.0.CO;2-G   [Google Scholar]
40. Yahya A, Asiah N, and Nurjanah R (2023). Tax avoidance in relationship on capital intensity, growth opportunities, financial distress and accounting conservatism. Journal of Business Management and Economic Development, 1(2): 154-165. https://doi.org/10.59653/jbmed.v1i02.56   [Google Scholar]
41. Yang T and Zhao S (2014). CEO duality and firm performance: Evidence from an exogenous shock to the competitive environment. Journal of Banking & Finance, 49: 534-552. https://doi.org/10.1016/j.jbankfin.2014.04.008   [Google Scholar]
42. Zhang J, Zi S, Shao P, and Xiao Y (2020). The value of corporate social responsibility during the crisis: Chinese evidence. Pacific-Basin Finance Journal, 64: 101432. https://doi.org/10.1016/j.pacfin.2020.101432   [Google Scholar]