CSR investments strategies of financially distressed firms in competitive markets

This study investigates the behavior of distressed firms toward CSR-investments under competitive market pressure. Using a sample of 105 non-financial French firms listed on the SBF-250 index from 2005 to 2020, the findings reveal that distressed firms are incentivized to invest in CSR, particularly in environmental and social dimensions. CSR initiatives serve as a form of insurance, helping to buffer the negative effects of financial distress. Moreover, the positive effect of financial distress on CSR is more pronounced in competitive markets. This research is among the first to analyze CSR from the perspective of financially distressed firms and uniquely includes market competition as a moderating factor. The findings carry significant implications for decision-makers, such as investors evaluating opportunities in competitive markets, and underscore the value of social and environmental initiatives in enhancing firm performance, especially during financial distress.