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Corporate governance and firm’s risk behavior: the moderating role of corporate social responsibility

Khurram Shahzad (Beijing Institute of Technology, Beijing, China)
Rizwan Ali (Lahore Business School, The University of Lahore, Lahore, Pakistan)
Ramiz Ur Rehman (Faculty of Business, Sohar University, Sohar, Oman)

Managerial Finance

ISSN: 0307-4358

Article publication date: 23 February 2024




This study aims to examine the nexus of corporate governance with firms' financial risk-taking behavior under the corporate social responsibility (CSR) disclosures in the context of non-financial listed firms of an emerging economy.


This study investigates the relationship between corporate governance as evaluated by an index and several financial risks, including idiosyncratic, default and systematic risks. The connection of corporate governance with financial risks is also studied while considering the moderation of CSR disclosures. The data are collected from 2014 to 2018 of 73 top 100-index listed non-financial firms of Pakistan Stock Exchange (PSX). Panel regression fixed effect and 2-step generalized method of moments techniques are applied to confirm the hypothesis along with the diagnostic tests to confirm that all outcomes of models must be authentic and reliable.


The study’s findings confirm that enhancing the overall corporate governance measures resulted in an augment in the firm’s risk due to weak control and regulations prevailing in emerging economies. Moreover, CSR disclosures enhance stakeholder information, lessen information asymmetry about management policies and mitigate the risk associated with operational uncertainties.

Practical implications

This study has a practical implementation to policymakers that effective monitoring and controlling measures facilitate the corporate management for minimizing the financial risks. Further, the study’s findings shed light that implementing corporate governance measures is not enough to mitigate financial risks until supervisory measures in the form of CSR disclosures are not taken to analyse corporate governance effectiveness.


This paper enhances the key findings in the literature by examining the role of corporate governance measures with respect to firms’ financial risks considering the moderating role of CSR disclosures. Furthermore, this research adds to the body of knowledge regarding the implementation of monitoring measures that assist in the mitigation of firms’ financial risks hence firm value.



Shahzad, K., Ali, R. and Rehman, R.U. (2024), "Corporate governance and firm’s risk behavior: the moderating role of corporate social responsibility", Managerial Finance, Vol. ahead-of-print No. ahead-of-print.



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