Exchange and moral capital of CSR disclosure and financial distress likelihood of family management firms: evidence from India

Abstract

Purpose The purpose of this study is to examine the effect of moral and exchange capital of corporate social responsibility (CSR) disclosure on the financial distress likelihood of family management firms in India. Design/methodology/approach The constructed data set (i.e. Morgan Stanley Capital International) and Kinder, Lydenberg and Domini social performance rating data format) consists of 66 firms with 655 firm-year observations for family-managed firms that practise sustainability reporting on the Indian stock market from 2010 to 2019. Findings The first findings show that current and previous year-two CSR disclosure reduces family management firms’ financial distress. The second findings show that the exchange capital of CSR disclosure does not influence the financial distress likelihood of family management firms in India. The third findings show that moral capital of CSR disclosure of the current year, previous year-one and previous year-two more than likely reduce financial distress likelihood of family management firms in India. This study is robust due to the lagged variables of the dependent variables. Practical implications Management investment must be high in moral capital to accrue social capital, but the success is dependent on a policy of continuous support for establishing family-related businesses. Similarly, society can benefit as the firm becomes attractive to green consumers as additions to the consumers of a CSR-driven firm. The consequences can cause firms to be more philanthropic to the community. Originality/value The novelty shows that to the best of the authors’ knowledge, no studies examine CSR disclosure’s moral and exchange capital on financial distress likelihood in India. Also, there is no evidence from the perspective of family management studies in CSR-financial distress likelihood nexus.