Abstract

This study explores the influence of corporate social responsibility (CSR) disclosure on the financial risk of bankruptcy, with a focus on the moderating impact of the corporate governance index in the context of companies listed on the Saudi Arabia stock exchange. Employing a quantitative methodology and a longitudinal research design, data were collected from 115 listed firms over the period 2011 to 2022. Panel data analysis revealed that CSR disclosure does not exert a significant impact on the risk of financial distress. Furthermore, the corporate governance index was found to have a negative and statistically significant effect on the financial risk of bankruptcy. The study also uncovered that the corporate governance index plays a negative and significant moderating role between CSR disclosure and the financial risk of bankruptcy in Saudi Arabian listed companies. The results underscore the critical role of corporate governance in steering firms away from the precipice of bankruptcy. Specifically, the prevalence of institutional and managerial ownership within firms, characterized by their long-term perspectives, serves as an incentive for increased voluntary CSR disclosures. This strategic approach aims to enhance shareholder trust to the maximum extent possible, serving as a proactive measure against financial distress. Consequently, our research contributes by highlighting that governance practices effectively mitigate the risk of financial disasters, achieving a delicate balance between CSR initiatives and financial prudence.