The impact of implementing social responsibilities on the risk of financial distress for enterprises in the plastic and chemical production industry listed in the stock market

BANKING ACADEMY FINANCE FACULTY GRADUATION THESIS THE IMPACT OF IMPLEMENTING SOCIAL RESPONSIBILITIES ON THE RISK OF FINANCIAL DISTRESS FOR ENTERPRISES IN THE PLASTIC AND CHEMICAL PRODUCT

The necessity of the topic

Financial distress risk remains a critical concern for businesses, particularly in the wake of the 2008 financial crisis, which underscored the need for effective governance and strategies for prevention and response Previous empirical studies have predominantly focused on the forecasting ability and cash flow of investment firms, utilizing data from financial statements (Altman et al., 1977; Ohlson, 1980; Snakewski, 1984) As the discourse on financial distress risk evolves, research by Lee & Yeh (2004) and Deng & Wang has expanded the understanding of this complex issue.

(2006) and Fich & Slezak (2008) has argued that the mere use of accounting data is not enough to ensure FDR's predictability and proposed the addition of a group of corporate governance factors

The COVID-19 pandemic significantly disrupted global supply chains, leading to production halts and economic downturns A study by Nguyen Thanh Tung (2020) revealed that the pandemic heightened financial distress risks for businesses in Ho Chi Minh City by 1.55 to 2.25 times Consequently, the bankruptcy rate in Vietnam surged during this period, highlighting that businesses must prioritize not only investment and profit generation but also proactive financial risk management Moreover, integrating non-financial information alongside financial data has become essential and urgent in the current landscape.

Sustainable development and social responsibility indicators are increasingly vital in today's business landscape, reflecting a shift from profit maximization to a balanced approach that considers stakeholder interests While this concept is well-established globally, it remains relatively new in Vietnam, where businesses have yet to fully embrace its significance Nevertheless, Vietnam is aligning with global trends by gradually implementing policies that promote economic growth alongside corporate social responsibility.

In developed countries, extensive research on corporate social responsibility (CSR) highlights its positive impact on business performance, with studies by Margolis & Walsh (2001) and Boubaker et al (2020) demonstrating CSR's role in mitigating financial distress risk (FDR) and reducing government intervention risks (Godfrey et al., 2009) Conversely, research on CSR in our country is limited, primarily focusing on enterprise performance (Ta Thi Thuy Hang, 2017; Ho Thi Van Anh, 2018), with only a few studies exploring the link between social responsibility and corporate financial distress risk (Tran Trieu Anh Khoa, 2022).

Manufacturing is a crucial sector in Vietnam, significantly contributing to economic development while also posing environmental challenges The presence of manufacturing factories heightens the risk of pollution, a persistent issue in society This study specifically examines the plastic and chemical production industries within the manufacturing sector that are listed on the Vietnam stock market.

This article explores the critical relationship between corporate financial distress and the implementation of social responsibility, specifically within the plastic and chemical production industry of publicly listed companies It emphasizes the significance of understanding how social responsibility initiatives can influence the financial stability of enterprises, highlighting the need for further research in this emerging area.

Research objectives

This research project aims to evaluate how the implementation of social responsibility affects the financial distress risk of companies in the plastics and chemicals sector listed on the Vietnam stock market.

- An overview of the theoretical foundations of social responsibility and the risk of financial distress, and the theoretical implications of the relationship between CSR and FDR

- Clarify the situation of plastic–chemical enterprises implementing social responsibility in Vietnam

This study employs econometric models to evaluate the influence of social responsibility factors on the financial distress risk of plastic-chemical manufacturing companies listed on the Vietnam stock market By analyzing these relationships, the research aims to provide insights into how social responsibility initiatives can mitigate financial risks in this sector The findings underscore the importance of integrating social responsibility into corporate strategies to enhance financial stability and sustainability for these enterprises.

- From the research results, propose some recommendations and policies to improve and overcome the limitations of implementing social responsibility to minimize the risk of corporate financial distress.

Subjects and scope of the research

This research focuses on the relationship between corporate social responsibility (CSR) and the risk of financial distress CSR is assessed through content analysis across four key dimensions: environment, employees, products, and community (Ho Thi Van Anh, 2017) In contrast, the risk of financial distress is evaluated using indicators such as the Z-score (Altman).

This research encompasses data from 50 plastic-chemical companies listed on the Vietnam stock market between 2019 and 2023, as reported by VietstockFinance (2024) Non-financial information related to corporate social responsibility is gathered from sustainability reports and annual corporate reports, as noted by Ho Thi Van Anh.

Research methodology

This study employs a qualitative method to analyze sustainable development and annual reports from enterprises, focusing on corporate social responsibility (CSR) metrics across four key criteria: environment, employees, products, and community (Ho Thi Van Anh, 2017) By evaluating the current state of social responsibility within the plastic and chemical industry, the research aims to provide targeted recommendations for improvement.

This thesis employs Stata 17 to conduct linear regression analysis, utilizing ordinary least squares (OLS), random effect model (REM), and fixed effect model (FEM) techniques The study aims to explore the relationship between social responsibility and the risk of financial distress, while also identifying and correcting any defects in the model.

Research contributions

This thesis investigates the relationship between the implementation of social responsibility and the risk of corporate financial distress, addressing the critical research question: "Is there a connection between social responsibility and corporate financial distress risk?" The findings aim to contribute valuable insights into how social responsibility practices can influence corporate financial stability.

This article synthesizes the theories of corporate social responsibility (CSR) and financial distress risk, highlighting how the implementation of CSR can influence the likelihood of corporate financial distress It aims to provide additional scientific insights into the relationship between CSR practices and financial stability, contributing to the understanding of how social responsibility initiatives can mitigate financial risks for corporations.

This thesis evaluates the current state of corporate social responsibility (CSR) within the plastic-chemical industry, highlighting its crucial role in modern corporate governance It examines CSR through the lenses of environmental impact, labor practices, product responsibility, and community engagement The findings aim to provide business leaders and government officials with a clearer understanding of the significant role enterprises play in the economy, emphasizing the importance of balancing stakeholder interests as a foundational objective for businesses, ultimately contributing greater value to society.

Research Structure

Chapter 1: Overview of the impact of social responsibility on the risk of financial distress

Chapter 2: Databases and Research Methods

Overview of the impact of CSR implementation on the risk of corporate

Overview of corporate social responsibility

1.1.1 Corporate social responsibility (CSR) concept

The term corporate social responsibility officially appeared when H.R Bowen

In 1953, the book "Social Responsibilities of the Businessmen" was published, advocating for business leaders to respect the rights and interests of others and encouraging charitable actions to compensate for societal harm caused by businesses This work sparked diverse perspectives from researchers, including notable contributions from Keith Davis.

Corporate social responsibility (CSR) extends beyond mere compliance with legal and economic standards, as noted by (1973), who emphasizes the need for businesses to address broader societal issues Archie Carroll (1999) expands this definition, highlighting CSR as encompassing the economic, legal, ethical, and societal expectations placed on businesses Matten and Moon (2004) describe CSR as a dynamic cluster concept that includes business ethics, corporate charity, corporate citizenship, sustainability, and environmental responsibility, all of which are influenced by the specific economic, political, and social contexts The growing interest in CSR has led to diverse interpretations and research in the field.

Social responsibilities refer to corporate initiatives aimed at reducing harmful impacts and enhancing positive contributions to society, as outlined by Mohr et al (2001) Similar principles are also discussed by Maignan and Ferrell, emphasizing the importance of a long-term beneficial influence on communities.

In 2004, it was posited that a business is socially responsible when its decisions and activities aim to balance the interests of all stakeholders involved The World Bank's Group Private Economic Development analyzed this concept in 2003, defining Corporate Social Responsibility (CSR) as the commitment of enterprises to contribute to sustainable economic development by adhering to standards in environmental protection, gender equality, occupational safety, labor rights, fair pay, staff training, and community development Research indicates that CSR impacts not only internal stakeholders like shareholders and creditors but also external parties, including customers, communities, and social organizations, ensuring a broader societal benefit.

Social responsibility has gained significant importance, leading to various definitions without a consensus According to Sheehy and Benedict (2015), it is described as "self-regulation in business by international private enterprises." Their research highlights two main reasons for differing views on CSR Firstly, perspectives vary: entrepreneurs may see CSR as a strategy to enhance business reputation, while NGOs might view it as greenwashing, and government officials may interpret it as voluntary corporate action in the public interest Secondly, disagreements in definitions can stem from differing legal contexts; for instance, an economist might view CSR implementation as a rational decision to reduce agency costs, whereas a legal scholar might see it as compliance with legal obligations.

In the present period, the concept of social responsibility of Carroll (1979) stated

Corporate social responsibility (CSR) encompasses the economic, legal, ethical, and voluntary expectations that organizations must meet at any given time, making it a comprehensive framework for research According to Hopkins (2003), CSR involves ethical behavior towards both internal and external stakeholders, aiming to enhance their quality of life while ensuring the business remains profitable This definition highlights two critical aspects that warrant further clarification.

Ethical behavior is often subjective and varies based on individual perspectives, making it challenging to define precisely The debate surrounding who qualifies as stakeholders is ongoing; however, key groups can be identified both within and outside the business Internal stakeholders typically include the Board of Directors, shareholders, and employees, while external stakeholders encompass customers, suppliers, and the community at large.

The concept of Corporate Social Responsibility (CSR), as proposed by Hopkins (2003), encompasses the interests of various stakeholders, including suppliers, customers, the environment, government, and the community, highlighting the importance of addressing both internal and external business concerns.

Carroll (1979) provides a comprehensive evaluation of social responsibility, proposing a definition that outlines the obligations businesses have to their stakeholders In 1991, Carroll identifies four key aspects of corporate social responsibility that serve as a foundational framework: philanthropic responsibilities, ethical responsibilities, legal responsibilities, and economic responsibilities This framework has become one of the most widely referenced models in the field.

The foundation of sustainable business growth and competitive advantage lies in economic responsibility, which mandates that companies prioritize profitability while adhering to legal frameworks Ethical responsibility expands on this by addressing societal expectations for businesses to balance stakeholder interests, including those of employees, customers, shareholders, and the community Additionally, charitable responsibility manifests through active participation in social welfare initiatives, although it is not a prerequisite for fulfilling ethical obligations Companies can demonstrate ethical responsibility by ensuring high-quality products and environmentally friendly practices without necessarily engaging in charitable activities While philanthropy is a recognized aspect of corporate social responsibility (CSR), it represents only a small part of the broader CSR landscape, prompting a need for more comprehensive assessment methods beyond just analyzing charitable expenditures.

1.1.2 Measurement of corporate social responsibility

In the past, corporate social responsibility (CSR) was primarily assessed through the costs associated with charitable donations to social welfare projects However, the growing complexity of relationships between businesses and social issues has necessitated more sophisticated measurement tools for CSR This shift has given rise to initiatives like social accounting, sustainability reporting, and performance indicators, akin to ESG (Environmental, Social & Corporate Governance) ratings, which evaluate the impact of businesses on communities These indicators serve as effective measurement tools, directly reflecting corporate contributions to sustainable development for stakeholders Sustainability reports and corporate website disclosures exemplify this commitment to transparency Nevertheless, the measurement and evaluation of CSR continue to evolve, incorporating new variables to enhance effectiveness.

Various frameworks have been established to evaluate social responsibility, with the Business Social Compliance Initiative (BSCI) being a prominent example Launched in 2003 by the Foreign Trade Association (FTA), the BSCI comprises nine critical standards that address compliance with laws, freedom of association, collective bargaining rights, anti-discrimination measures, fair labor remuneration, working hours, workplace safety, and prohibitions against child and forced labor, as well as environmental safety Additionally, other widely recognized indicators include the Dow Jones Sustainable Development Indicators (1999) and the GRI Sustainable Development Report, which are commonly utilized by businesses globally.

In 2002 and 1960, significant frameworks emerged that highlight the intersection of economy, environment, and society in sustainable development These three indicators collectively evaluate the impact of businesses on these critical aspects, emphasizing the importance of corporate responsibility in fostering a balanced approach to sustainability.

The rise in CSR rating agencies reflects a growing demand for their services, as noted by Escrig-Olmedo et al (2019) However, the lack of standardization poses a significant challenge, with no unified tool available for assessing corporate social responsibility (Callado and Fensterseifer, 2011) While various measurement sets may share common indicators, their evaluation methods differ, resulting in businesses obtaining varied assessments of social responsibility based on the measurement criteria used.

In Vietnam, the mandatory disclosure of Corporate Social Responsibility (CSR) information for listed enterprises, as outlined in Circular No 155/2015/TT-BTC effective from January 1, 2016, marks a significant advancement towards a sustainable financial market and attracts international investors According to Clause 2, Article 8 of this Circular, companies are required to report on their environmental and social impacts, sustainable development practices, raw material management, energy and water consumption, compliance with environmental laws, worker policies, community responsibilities, green capital market initiatives, and overall sustainable development efforts However, the limited information channels available currently pose challenges in effectively measuring CSR performance among enterprises in Vietnam.

Overview of the risk of financial distress

1.2.1 The concept of financial distress risk

Financial distress refers to a challenging financial state for a business, characterized by terms such as failure, insolvency, bankruptcy, and default These concepts are grounded in the cash flow model and asset liquidation theories According to Beaver (1966), a business can be likened to a "reservoir" of cash inflows and outflows, and when it faces financial difficulties, it resembles a reservoir that has been depleted of water.

Foster (1986) defines financial distress as a serious shortage of liquidity that cannot be solved without a large-scale restructuring of business operations Doumpos

Financial distress encompasses more than just the inability to meet payment obligations; it also includes scenarios where a company's total liabilities surpass its total assets, resulting in a negative net asset value (Zopounidis, 1999) According to Ross et al (1999), financial difficulties manifest in several forms: business failure occurs when a company cannot repay its debts after liquidating assets; statutory bankruptcy arises when either creditors or the company itself petitions the court for bankruptcy proceedings; technical bankruptcy refers to the failure to meet principal and interest repayment obligations; and finally, book bankruptcy is identified by a negative net asset value.

In economies with significant government intervention, such as China and Vietnam, financial distress is often assessed based on specific criteria set by stock market regulators For instance, companies listed on the China Stock Exchange may face special control measures if they report negative after-tax profits for two consecutive years or have a net asset value per share that falls below the par value Additionally, the concept of relative financial distress, introduced by Sun, He, et al (2011), refers to the decline in an enterprise's financial condition at a particular point in its life cycle.

Financial distress is defined through various perspectives, influenced by researchers' goals Theoretical analysis indicates that financial distress can range from mild cash flow issues to severe conditions leading to bankruptcy Businesses often transition between these states, reflecting ongoing operational instability Empirical research, facing data limitations, typically uses specific criteria like statutory bankruptcy or stock market delisting to identify financial distress The identification process remains contentious, as it heavily relies on financial information from enterprise financial statements, which forms the basis for various indicators measuring financial distress risk, further elaborated in subsequent sections.

1.2.2 Measuring the risk of financial distress

Financial distress risk (FDR) is primarily assessed using financial statement data, with Beaver (1966) identifying 30 financial indicators grouped into six categories, highlighting their significance in FDR measurement Altman (1968) enhanced this approach with multifactor differential analysis, leading to the development of the Z-score index, a widely recognized metric for assessing financial distress Despite these advancements, Beaver et al (2011) noted limitations in relying solely on historical financial data, as it fails to accurately predict future expectations and changes in net assets related to business operations Additionally, the likelihood of default or bankruptcy often hinges on timely decision-making.

To address the limitations of traditional data-driven measurement tools in financial statements, researchers have created FDR measurement and forecasting tools that utilize market information, beginning with option pricing theory (Black & Scholes, 1973) and Merton's model (1974) This innovative approach values a company's share capital as a European-style call option based on its asset value Although advanced measurement tools like distance-to-default (Merton, 1974), BSM_Prob (Hillegeist et al., 2004), and CHS (Campbell et al., 2008) offer detailed insights into FDR measurement, their complexity has led to limited usage Consequently, financial information-based FDR measurement tools, such as the Z_score index (Altman, 1968), O_score index (Ohlson, 1980), and Zm_score (Zmijewski, 1984), along with simpler metrics like negative working capital, negative operating cash flows, and interest payment ratios, remain essential and widely employed in practice.

The integration of financial data and market information for measuring Financial Distress Risk (FDR) is increasingly recognized for its effectiveness, gradually replacing traditional accounting-based tools In developed countries, where stock markets are well-regulated and information asymmetry is minimal, the combination of market and accounting data provides an accurate representation of a company's financial health Conversely, in countries like Vietnam, where market information may not reliably reflect financial challenges, FDR measurement tools that rely on financial statements are deemed more trustworthy This rationale underpins the use of the Z-score index (Altman, 1968) in this thesis for assessing FDR.

Impact of social responsibility on the risk of corporate financial distress

Resource dependence theory, proposed by Pfeffer and Salancik in 1978, emphasizes that businesses require external resources for growth and sustainability, highlighting their lack of self-sufficiency To acquire essential resources, companies often engage in both formal and informal collaborations with other organizations, which ensures a consistent supply of quality resources However, this reliance on external partners diminishes the autonomy of the enterprise, increasing its dependence on related entities Ultimately, this interdependence reflects the mutual reliance between businesses during the resource exchange and cooperation process.

Businesses engage in Corporate Social Responsibility (CSR) to gain a competitive advantage, as it offers both internal and external benefits From a resource-based perspective, investing in CSR fosters the development of essential resources and competencies, enhancing corporate culture and know-how This investment can significantly impact intangible resources, particularly those related to employees Externally, CSR influences a company's reputation, which is a crucial intangible asset that can be strengthened or weakened based on CSR participation A strong reputation for social responsibility not only improves relationships with external stakeholders but also helps attract top talent and boosts the motivation and loyalty of current employees Consequently, implementing CSR is strategically valuable and can mitigate financial risks for businesses.

Legality theory underpins social contracts between firms and society, emphasizing that organizations must align with evolving societal expectations to maintain legitimacy (Dowling and Pfeffer, 1975; Islam and Deegan, 2008) These expectations, which are dynamic and not static (Shocker and Sethi, 1973), create an ethical obligation for enterprises to fulfill societal demands Only those businesses operating legally are entitled to utilize society's natural and human resources (Mathews, 1995) Consequently, corporate social responsibility (CSR) serves as a vital tool for companies to communicate their practices and align with societal expectations, thereby securing their license to operate within the community (Islam and Deegan, 2008).

Legitimacy theory posits that for a company to thrive, it must adhere to societal norms of socially responsible behavior (O'donovan, 2002) According to Deegan and Unerman (2011), this theory represents a "social contract" between organizations and the communities they serve In this context, businesses often produce CSR reports to gain social approval and legitimize their actions (Omran & Ramdhony, 2015) Additionally, the theory of institutions underpins legitimacy theory by highlighting how various organizational activities are driven by the pursuit of legitimacy, influenced by prevailing social norms.

According to Gary Odonovan (2006), current research highlights that companies publish environmental information in their annual reports primarily due to legitimacy theory This theory suggests that since the early 1980s, the increase in environmental disclosure is driven by the need for companies to align their operations with socially acceptable behaviors to maintain their success and reputation within society.

The theory of legitimacy, as outlined by Deegan (2002), posits that an organization's rights and responsibilities are derived from societal norms To align with societal expectations, businesses must operate within these boundaries, ensuring they provide improved goods and services By functioning harmoniously within the broader social system and avoiding negative impacts, organizations can achieve their goals and maintain stable profitability.

According to Guthrie and Parker (1989) and O'Donovan (2002), legitimate theory posits that organizations operate under a social contract with society, which managers agree to uphold by meeting various social requirements alongside organizational goals For businesses to be deemed reputable, they must act transparently and provide sufficient information for societal evaluation Ultimately, legitimate theory suggests that fulfilling social responsibilities serves as a corporate incentive for societal recognition, thereby mitigating the risk of financial distress.

Stakeholder theory, introduced by Friedman in the 1970s, highlights the intricate relationship between a company's operations and its various stakeholders This theory posits that businesses should not solely focus on maximizing profits for shareholders but also consider the interests of all parties involved in their operations Internal stakeholders encompass shareholders, employees, board members, and management, while external stakeholders include customers, suppliers, society, media, government, and other significant organizations.

Figure 1.2: Stakeholders according to Freeman (1984 )

Stakeholder theory and Corporate Social Responsibility (CSR) both prioritize integrating societal benefits into business objectives Stakeholder theory emphasizes the importance of fostering relationships and creating value for all stakeholders, advocating for equal consideration and avoidance of benefit trade-offs Effective governance is crucial for aligning diverse interests towards common goals, as poor management skills can lead to financial distress risk (FDR), according to Altman & Hotchkiss (2010) Attig et al (2013) highlight that companies prioritizing CSR often enjoy higher credit ratings, which enhances their operational sustainability and reflects strong management capabilities through efficient resource utilization and reduced costs associated with irresponsible practices Furthermore, credit rating agencies recognize CSR initiatives as contributing to sustainable business improvements and lowering FDR Transparency in CSR activities also enhances ethical compliance and risk management awareness, facilitating predictions of long-term corporate cash flow growth.

The representative issue, identified by Jensen and Meckling (1976) and Fama and Jensen (1983), arises from the enforcement of contracts among representatives with conflicting interests Representation costs encompass the expenses associated with structuring and monitoring these contracts, as well as losses incurred when execution costs surpass benefits Consequently, a business's survival hinges on the advantages of risk sharing, management performance, contractual payment outcomes, and the costs associated with the separation of management and ownership.

Representation theory examines business relationships where an owner delegates tasks to a representative who acts on their behalf (Eisenhardt, 1989) Many contractual challenges in business arise from representation issues, such as moral hazard and adverse selection, as principals and representatives often have differing goals and risk tolerances.

Representation theory suggests that conflicts emerge from incomplete and asymmetric information between shareholders and company representatives The differing interests of these parties can be mitigated through effective mechanisms that align shareholder and manager goals This includes implementing suitable remuneration systems for managers and establishing robust monitoring processes to curb abnormal and self-serving behaviors.

CSR disclosure plays a crucial role in the contractual relationships between shareholders and managers, as well as between businesses and creditors Shareholders incur oversight costs to obtain essential information regarding managerial performance Consequently, managers may leverage published accounting data to safeguard their interests and showcase their effectiveness to shareholders (Watts & Zimmerman, 1978).

1.3.2 Empirical studies on the impact of social responsibility on the risk of financial distress

Research on corporate social responsibility (CSR) in Vietnam is limited, primarily concentrating on theoretical frameworks and the disclosure behaviors of companies Studies by Le Ngoc My Hang (2015), Kelly Anh Vu et al (2017), and Ta Thi Thu Hang (2020) indicate a low level of CSR information disclosure among Vietnamese enterprises Pham Duc Hieu (2012) found that business leaders often lack awareness of CSR's importance, while Kelly Anh Vu's research in 2013 on 200 listed companies revealed that state and managerial ownership negatively impacted CSR announcements Additionally, many Vietnamese companies exhibit a spontaneous and formal commitment to CSR, as highlighted by Nguyen et al (2018), often prioritizing profit maximization over social responsibility due to a lack of understanding of CSR's benefits (Thanh & Podruzsik, 2018).

In addition, a research branch on this topic in Vietnam is on the impact of CSR implementation on corporate financial performance Ho Viet Tien and Ho Thi Van Anh

A study conducted by 2017 revealed that the disclosure of information related to community activities, product responsibility, and environmental responsibility positively influences the Return on Assets (ROA) and Tobin's Q of listed enterprises from 2012 to 2016 In contrast, Nguyen Bich Ngoc et al (2015) and Ho Thi Van Anh (2018) found no correlation between Corporate Social Responsibility (CSR) and Tobin's Q However, research by Kabir and Hanh Minh Thai (2017) and Ta Thi Thuy Hang (2020) indicated that CSR disclosure enhances both ROA and Tobin's Q A study by Cuong Nguyen and Lan Nguyen (2021) involving 27 listed enterprises from 2015 to 2019 demonstrated that CSR information disclosure improves financial efficiency Additionally, Nguyen Thi Bich Ngoc (2015) analyzed annual reports from 50 companies listed on the Vietnam stock exchange between 2010 and 2013, concluding that social responsibility information positively affects enterprise value, particularly highlighting that environmental information has a beneficial impact while employee-related information negatively affects it.

Research gaps

Social responsibility has emerged as a pressing concern in Vietnam in recent years, yet the volume of research addressing this topic remains limited, highlighting significant gaps in the existing literature.

The lack of uniformity in corporate sustainability policies has led to significant systemic issues and challenges in assessing Corporate Social Responsibility (CSR) Despite having similar qualitative and quantitative criteria, the outcomes of CSR initiatives vary greatly among businesses (Chatterji et al., 2016) Moreover, companies may exploit the absence of standardized CSR measurement to artificially enhance their scores, thereby improving brand value and corporate image Consequently, the lack of a formal assessment system undermines the accuracy of CSR evaluations across enterprises, distorting the true representation of their commitment to social responsibility.

The assessment of financial information's impact on Financial Distress Risk (FDR) has been significantly shaped by foundational studies, notably by Beaver et al (2011), Altman (2000), and Altman et al (2017), which highlight the critical role of financial data in FDR forecasting Ongoing advancements in FDR forecasting models are focused on enhancing predictive accuracy by incorporating additional variables, particularly enterprise market information such as market capitalization and stock price fluctuations, as emphasized by Shumway (2001) and Bharath.

& Shumway, 2008), (Campbell et al., 2008; Campbell et al., 2011) and the impacts of the macroeconomic environment such as interest rates, inflation (Tinoco & Wilson,

The integration of non-financial data into the Financial Disclosure Regulation (FDR) research model is a recent development, primarily emphasizing corporate governance and board structure (Elloumi & Gueyié, 2001; Deng & Wang, 2006; Fich & Slezak, 2008) Despite this focus, there remains a notable lack of research exploring the connection between social responsibility and corporate financial risk.

Research framework proposal

The CSR implementation evaluation system for the plastic-chemical manufacturing industry in Vietnam utilizes previous research to assess the performance of CSR through comprehensive and regression analysis methods This evaluation reveals the impact of CSR on the financial distress risk of Vietnam-listed plastics and chemicals enterprises Recommendations are made for governments, businesses, and investors to prioritize CSR performance, enabling regulators to develop relevant policies that support informed investment decisions Furthermore, the study emphasizes the connection between CSR investments and the financial health of businesses in developing markets like Vietnam, particularly in environmentally impactful sectors such as plastics and chemicals.

This study investigates the relationship between the transparency of Corporate Social Responsibility (CSR) information and the risk of corporate financial distress, focusing on how varying levels of disclosure affect this risk Utilizing a sample of 50 companies from the plastics and chemicals sector listed on the Vietnam stock market, the research highlights the significant influence of these businesses on environmental policies and societal impact.

This research paper evaluates the influence of Corporate Social Responsibility (CSR) on the financial distress risk of businesses, focusing on management's strategic vision and responsibility in four key areas: environment, labor, community, and products To measure corporate financial distress risk, the study employs Altman's Z-score model from 1968, which utilizes various financial indicators, including working capital, total assets, liabilities, and revenue.

Figure 1.3: Impact study framework of CSR implementation on the risk of corporate financial distress

This study comprises four key sections: an overview, a detailed database and research methodology in part two, an analysis of the experimental model and research data along with verification results in part three, and concluding with recommendations for Vietnamese businesses to effectively implement Corporate Social Responsibility (CSR).

Corporate Social Responsibilities (non financial indicators)

Databases and Research Methods

Databases

This research paper examines the influence of Corporate Social Responsibility (CSR) on the financial distress risk of companies in Vietnam's plastic-chemical industry, focusing on those with significant environmental impacts The study highlights that such companies must actively engage in environmental stewardship and transparently report their efforts in annual reports To ensure comprehensive data analysis, the research requires complete financial statements from 2019 to 2023 Additionally, CSR information will be sourced from ESG reports, annual reports, and media outlets to calculate a relevant score.

The study focuses on a sample of 50 enterprises in the plastic and chemical manufacturing sector listed on the Vietnam stock market from 2019 to 2023 The author excluded companies that did not publish their annual reports for 2023, ensuring that only those with complete information were selected for analysis.

Research variable description

2.2.1 Financial distress risk - dependent variable

Empirical research identifies two primary methods for measuring Financial Distress Risk (FDR) The first method relies on accounting data, as demonstrated in studies by Altman et al (2017) and Tykvová & Borell (2012) The second method integrates both market data and corporate accounting data, as utilized in the research conducted by Shumway (2001) and Bharath & Shumway.

The integration of accounting and market data in Financial Distress Risk (FDR) measurement enhances the accuracy and effectiveness of forecasting Research by Agarwal & Taffler (2008), Das et al (2009), and Bauer & Agarwal (2014) has assessed the efficacy of various FDR forecasting models that utilize accounting data, market data, and risk-hazard frameworks Notably, Das et al (2009) assert that FDR forecasts derived from accounting data are equally effective as those based on market data, highlighting the complementary nature of these two data sets in evaluating FDR.

The integration of accounting and market information enhances the efficiency of Financial Disclosure Regulation (FDR) measurement, as highlighted by Shumway (2001) and Campbell et al (2008) However, the effectiveness of market data is contingent upon strict regulation and oversight within the stock market Despite significant management improvements in Vietnam's economy, challenges such as stock price manipulation and insider trading persist, affecting the quality of market information Consequently, utilizing a pure accounting data approach for FDR measurement helps mitigate these issues, making it particularly relevant for emerging economies like Vietnam.

The thesis employs the Z-score indicator, developed by Altman in 1968, to assess the risk of financial distress using accounting data; a higher Z-score signifies a lower risk of financial distress.

The Z-score, a key financial metric, is calculated by subtracting current liabilities from current assets (WC), and its interpretation is crucial for assessing a company's financial health According to Altman (1968), a Z-score above 2.67 indicates that a business is in strong financial condition and unlikely to face distress in the future Scores between 1.81 and 2.67 suggest that while the company is currently stable, it may encounter financial difficulties soon Conversely, a Z-score below 1.81 signals significant financial distress and a heightened risk of bankruptcy Therefore, a higher Z-score is favorable for a business, while scores at or below 1.81 indicate a precarious financial situation.

2.2.2 Independent variables – Corporate social responsibility

The process of measuring CSR indicators of listed enterprises in the study sample is carried out through the following four steps:

The first step, identify a database that presents contents related to CSR activities of the enterprise According to the provisions of Clause 2 Article 8 Chapter II of Circular

According to No 155/2015/TT-BTC issued by the Ministry of Finance in 2015, listed enterprises are required to disclose information related to sustainable development, including management of raw material sources, energy and water consumption, compliance with environmental regulations, worker-related policies, community responsibility, green capital markets, and sustainable development information This framework establishes the essential data needed to create a Corporate Social Responsibility (CSR) index scale for the enterprises in the research sample of the thesis, based on the information published in their financial statements.

In the second step of the research, CSR assets are defined and categorized for measurement, following the framework established by Gray et al (1995) The study evaluates CSR through four key components: environmental responsibility, employee responsibility, product responsibility, and community responsibility These components are further elaborated upon with specific terms and criteria relevant to each area, and a comprehensive CSR scoring methodology is outlined in Appendix 1.

In the third step of the evaluation process, the criteria for the four components of Corporate Social Responsibility (CSR) will be assigned binary values A value of 1 indicates that the financial statements reflect the enterprise's acknowledgment of the specific criteria, while a value of 0 signifies its absence The evaluation encompasses 8 criteria for environmental responsibility, 6 criteria for employee responsibility, 5 criteria for community responsibility, and 4 criteria for product responsibility (Ho Thi Van Anh, 2017).

The fourth step involves calculating the CSR index using an unweighted method, where the total CSR score for each component is determined by averaging the criteria within that component Subsequently, the overall CSR score for the enterprise is obtained by averaging the CSR scores of all components (Ho Thi Van Anh, 2017).

• CSRij : get a value of 1 if the information related to the CSR criterion component i of enterprise j has published information, the opposite is 0

• Nij: Number of component CSR criteria i for business j

The content analysis method is commonly employed for measuring Corporate Social Responsibility (CSR) in Vietnam for three key reasons Firstly, despite existing mandatory regulations on CSR information disclosure, there is currently no organization in Vietnam that evaluates or ranks CSR efforts Secondly, the quantitative data available primarily focuses on volunteer activities and employee welfare expenditures, lacking a comprehensive overview of CSR practices Lastly, content analysis effectively categorizes written report content based on selected criteria, transforming qualitative data into quantitative scales, making it a prevalent approach in studies of non-financial disclosure behavior.

In the regression model, control variables are selected based on a review of relevant studies, including total asset size, financial leverage, research and development capacity, cash holding capacity, liquidity, and profitability.

SIZE variable measures by Log total assets, controlling the difference in potential and competitiveness of the business Cormier and Gordon (2001) and Orlitzky

Research has shown a significant correlation between company size and corporate social responsibility (CSR) activities, with larger companies possessing greater financial resources, influence, and capacity to engage in extensive CSR initiatives compared to their smaller counterparts Studies by Donker et al (2009) and Mselmi et al further support this assertion.

(2017) provide evidence for the correlation between enterprise size and FDR The thesis expects Size to have an impact that helps mitigate FDR

Financial leverage, represented by the ratio of total liabilities to total assets (LEV), plays a crucial role in assessing a company's ability to manage risk and invest in corporate social responsibility (CSR) Research by Waddock and Graves (1997) indicates that firms with stable financial positions and low debt levels are more likely to allocate funds towards CSR initiatives compared to those with unstable finances Additionally, companies with lower financial burdens incur less interest expense, allowing them to invest more in CSR activities Conversely, businesses that rely heavily on financial leverage and experience inconsistent income streams face higher interest payments, increasing their risk of financial distress and potential bankruptcy (Shumway, 2001; Chava & Jarrow).

2004), (Donker et al., 2009), (Christidis & Gregory, 2010), and (Mario Hernandez Tinoco, 2013) The thesis expects lower financial leverage will lower FDR

Research and development capability variable (R&D): Determined by the percentage of research and development funds to total assets of the previous year Zhang

Investment in research and development (R&D) significantly enhances financial development returns (FDR); however, businesses often encounter rigid R&D investment costs Companies that prioritize development investments frequently face financial constraints, which can lead to the premature cessation of projects Consequently, as R&D expenses rise, the associated risks for enterprises also increase.

The thesis analyzes the impact of CASH and QUICK ratios on businesses' capacity to manage cyclical payments Additionally, it highlights Return on Assets (ROA) as a key indicator of a company's efficiency in converting owned capital into profit, with a higher ROA reflecting effective asset utilization for profit generation.

Research methodology

This study employs quantitative methods to investigate the relationship between Corporate Social Responsibility (CSR) implementation and the risk of financial distress in businesses According to Jones (1995), quantitative and qualitative methods are complementary, with researchers using quantitative measures to test hypotheses and analyze causal relationships between variables (Hoepfl, 1997; Denzin and Lincoln, 1998) The focus on measuring relevant indicators underscores the importance of quantitative analysis in this research.

The author employs qualitative methods to search, analyze, and code relevant domestic and international studies, identifying key variables Specifically, to assess the CSR score, the author gathers CSR information disclosure data from annual reports and sustainable development reports of listed companies in the plastics-chemicals industry.

The thesis employs various regression techniques, including Ordinary Least Squares (OLS), Fixed Effects Model (FEM), and Random Effects Model (REM), to evaluate the influence of Corporate Social Responsibility (CSR) on Financial Disclosure Regulation (FDR) These methods are widely recognized in tabular data regression analysis The linear model is articulated as follows:

In this model, "i" represents the enterprise and "t" denotes time, with "Yit" serving as the dependent variable for the enterprise in year "t." The term "∝" indicates the blocking factor, while "Xit" is a vector comprising independent variables The estimation parameter is represented by "β," and "μit" signifies the residual.

In scenarios where there are no unobserved factors or individual influences affecting each enterprise, and the residual term μit is uncorrelated with the independent variables Xit, the Ordinary Least Squares (OLS) estimates remain unbiased and stable However, the presence of individual corporate influences is a prevalent issue in empirical research (Baltagi).

2008), FEM and REM estimates would be a more suitable choice than OLS

The basic data regression method assumes that the blocking and slope coefficients remain constant over time and across observed patterns However, since each enterprise has unique characteristics, using the ordinary least squares method can lead to distorted relationships between the dependent and independent variables.

Fixed-impact regression is a statistical model designed to account for omitted variables that differentiate cross-units, such as enterprises, while remaining constant over time This approach utilizes longitudinal data to assess the influence of independent variables on a dependent variable, making it a key technique in panel data regression analysis.

In certain scenarios, when there are omitted variables with constant values differing across cross units and time-varying variables that are uniform across all units, a random effects model is typically employed To determine whether to use random effects regression (REM) or ordinary least squares regression (OLS), the Breusch and Pagan Lagrangian multiplier test (LM test) is utilized Additionally, the Hausman test is conducted to differentiate between fixed effects models (FEM) and random effects models (REM).

After selecting a suitable model, the subject conducts other tests of the model's defects The project uses Stata17 statistical software to perform regression analysis techniques and perform model tests.

Research model

This study evaluates how Corporate Social Responsibility (CSR) influences the financial distress risk faced by businesses, drawing on research conducted by Al-Hadi et al (2019).

FDRit = ∝0it + CSR𝛽 1 it +SIZE𝛽 2 it + LEV𝛽 3 it + CASH𝛽 4 it + ROA𝛽 5 it +R&D𝛽 6 it

The author develops a model to analyze the impact of Corporate Social Responsibility (CSR) on corporate financial distress, incorporating insights from prior research The model includes one dependent variable, one independent variable, and seven control variables, allowing for a comprehensive examination of the relationship between CSR practices and financial risk.

Table 2.2: Interpretation and description of variables in the impact study of CSR on FDR

Risk of burnout Z-score (Altman, 1968)

C = Profit before tax and interest/Total assets

Size Log total assets SIZE

The ratio of liabilities to total assets LEV

Cash Ratio of cash and cash equivalents to total assets CASH

Return on asset The ratio of after-tax profit to total assets ROA

Quick (Current assets - Inventory)/Current liabilities QUICK

Research and development The ratio of investment and development funds to total assets R&D

Possibility of loss The variable takes the value 1 if the profit after tax is negative and takes the value 0 in the opposite case

Research hypothesis

The study focused on examining the comprehensive aspects of Corporate Social Responsibility (CSR) to understand its impact on a company's financial performance Research indicates that corporate governance and CSR are interrelated concepts that significantly influence each other (Galbreath, 2013; Rosam and Peddle).

Rosam and Peddle (2004) argue that corporate governance and corporate social responsibility (CSR) should be integrated as strategic management tools Research supports this integration, revealing positive correlations with stakeholder theory, representation theory, and human resource theory, indicating that effective CSR implementation can reduce the risk of corporate financial distress (Godfrey et al., 2009; Barnett and Salomon, 2006) Thus, the author proposes the following hypothesis.

Hypothesis: There is a positive impact between the performance of social responsibility and the risk of corporate financial distress.

Experimental Research Results

Overview of the implementation of social responsibility of enterprises in the plastic –

3.1.1 Current status of CSR implementation of enterprises in plastic – chemical manufacturing industry

Figure 3.1: Current status of CSR implementation over the years

(Source: Data collected and calculated by the author)

The current status of corporate social responsibility (CSR) among enterprises in the plastics and chemicals manufacturing sector listed on the Vietnam stock market from 2019 to 2023 is depicted in Figure 3.1 Notably, composite CSR scores have shown a consistent upward trend during this period, with 2022 marking a significant change compared to previous years This shift can be attributed to the implementation of Circular 155/2015-BTC by the Ministry of Finance, which took effect on January 1, 2016.

In 2016, regulations were introduced to mandate the disclosure of social responsibility information, increasing corporate obligations However, as this is a relatively new area, the adoption of corporate social responsibility (CSR) practices remains limited and faces several challenges, resulting in a low CSR implementation index Since 2020, the impact of the Covid-19 pandemic has further influenced the landscape of CSR practices.

19 pandemic, causing heavy damage to the economy, society has gradually paid more

The growing emphasis on corporate social responsibility (CSR) highlights the need for businesses to address environmental issues, community needs, and stakeholder interests to remain competitive in the market Globally, the focus on CSR has intensified, prompting companies to invest more in sustainable practices to facilitate international trade and adapt to integration trends This investment trend has steadily increased over the years, particularly gaining momentum as businesses faced the adverse effects of the Covid-19 pandemic.

3.1.2 Current status of CSR implementation according to target groups of enterprises in the as-chemical industry

Figure 3.2: Current status of CSR implementation by target group over the years

(Source: Data collected and calculated by the author)

Figure 3.2 illustrates the uneven implementation of social responsibility across various enterprise indicator groups, namely Environment, Labor, Community, and Products Notably, businesses have achieved the best results in the Labor category, while the Products target remains significantly lower Additionally, trends indicate annual growth in the environmental, labor, and community sectors.

Environment Labor Community Product community indicators has a more regular and steady growth than the product target However, the product is the indicator with the largest growth over the years

In addition, the author assesses that enterprises have not comprehensively invested in aspects of each indicator

Figure 3.3 Criteria for evaluating environmental indicators

Details of the criteria are in the appendix

(Source: Data collected and calculated by the author)

Environmental indicators for evaluation encompass raw materials, energy, water, emissions, waste treatment, and environmental protection policies Notably, reports on raw materials (84.4%), energy (81.2%), water (74.4%), and environmental concerns (84.4%) are the most frequently published However, indicators related to waste treatment (37.2%) and the development of environmental protection policies (12.4%) remain underreported Additionally, raw materials, energy, and water consumption indicators are included in the appendix as part of a social responsibility report per Circular 155/2015-BTC This highlights that while businesses are disclosing information on environmental issues, their focus is primarily on compliance with environmental laws, rather than on proactive contributions to environmental protection through policy development and investment plans.

Despite businesses becoming more transparent about environmental issues, their disclosures often meet only the minimum legal requirements This indicates a lack of genuine investment and concern for environmental improvements, ultimately hindering progress towards a better living environment.

Figure 3.4: Criteria for evaluating labor indicators

Details of the criteria are in the appendix

(Source: Data collected and calculated by the author)

Labor evaluation criteria encompass occupational safety, training, internal information dissemination, labor laws, wage policies, benefits, and commendations Notably, this criterion group exhibits the highest information disclosure index However, there is a significant disparity in the evaluation of labor issues, as illustrated in Figure 3.4 The criteria with the highest disclosure rates include employee education and training (90%), salary policy (74.4%), welfare (75.2%), and occupational safety (58%) These elements are deemed essential for assessing employee policies within enterprises.

In addition, the remaining 2 lowest criteria include dissemination of internal information and labor laws to employees (6%) and commendation (25.6%)

Figure 3.5: Criteria for evaluating community indicators

Details of the criteria are in the appendix

(Source: Data collected and calculated by the author)

The evaluation criteria for community involvement focus on participation activities, support for the elderly and impoverished, humanitarian efforts, educational funding, and health care advocacy Notably, there is a significant disparity between the reporting of community activities, with 70.4% of enterprises documenting their efforts The majority of these reports emphasize support for the elderly and poor (66.8%) and charitable activities (70.4%) However, the reporting on educational support and health care services is alarmingly low, at just 9.6% and 7.6%, respectively.

Figure 3.6: Criteria for evaluating product indicators

Details of the criteria see in the appendix

(Source: Data collected and calculated by the author)

The evaluation of the final product is based on four key criteria: product safety, product information, product quality, and customer satisfaction As illustrated in Figure 3.6, enterprises predominantly emphasize product quality disclosure at 100%, while the other criteria—product safety, product information, and customer satisfaction—remain significantly underreported in their reports.

Enterprises have demonstrated varying levels of responsibility in disclosing information across different indicators However, the announcements are not consistent, revealing significant discrepancies among the criteria within the same indicator.

Descriptive statistics

The author performs descriptive statistics on STATA 17 software to indicate the maximum value, minimum value, mean value, and standard order of the studied variables in the model

Table 3.1 Statistics describing the variables used in the research model

Variable Obs Means Std.dev Min Max

(Source: Data from Stata 17 software)

Table 3.1 presents the mean, standard deviation, minimum, and maximum values of the variables analyzed in the model from 2019 to 2023 The average financial distress risk index for companies in the plastic-chemical industry over this five-year period is 1.865961, indicating a relatively low level of risk that surpasses the acceptable safety threshold Notably, the lowest Z-score recorded is 0.1234838, while the highest Z-score reaches 13.96394.

The Corporate Social Responsibility (CSR) index averages 0.5073, indicating a moderate implementation rate of approximately 50.73%, which falls short of the established requirements The CSR values range significantly, from a low of 0.1739 to a high of 0.9565, highlighting the considerable disparity in the effectiveness of CSR practices among different organizations.

Correlation analysis

Using STATA 17 software, the author conducts a correlation analysis to explore the relationship between independent and dependent variables in the model The findings in Table 3.2 indicate a positive correlation between the CSR index and Z_score, implying that increased social responsibility implementation correlates with a reduced risk of corporate financial distress, aligning with previous studies (Al-Hadi et al., 2019; Boubaker & ctg, 2020) Additionally, the analysis reveals that both ROA and cash ratio are positively correlated with CSR, while business size and financial leverage exhibit a negative correlation with CSR.

Table 3.2 Correlation coefficient between variables in the study model

Z_score Size Leverage Cash ROA Quick R&D Loss CSR Z_score 1

(Source: Data from Stata 17 software)

The correlation coefficient matrix is utilized to identify linear multi-additiveness among CSR variables, Z_score variables, and financial index variables Most correlation coefficients among the explanatory variables are below 0.5, indicating low correlation; however, notable pairs, such as Cash and Z_score (0.5888), Quick and Cash (0.3850), and Quick and ROA (0.3558), exhibit higher correlations Overall, the correlation between variable pairs remains below 0.7, suggesting that their impact is minimal.

Multicollinearity Test

The multicollinearity test is essential for assessing the correlation among independent variables, particularly in this study focusing on the multicollinearity of CSR, Z-Score, and financial index variables Identifying multicollinearity is crucial, as it can skew regression results To ensure accurate regression outcomes, it is important to perform a multicollinearity test using methods such as the Pearson correlation test and the variance inflation factor (VIF).

Table 3.3 VIF variance magnification factor of model

(Source: Data from Stata 17 software)

The analysis indicates that the Leverage and Quick variables exhibit multicollinearity, with VIF coefficients of 2.26 and 2.10, respectively Despite this, the average VIF value of 1.63 remains below the critical threshold of 2, suggesting that serious linear multicollinearity is not present Consequently, multicollinearity does not pose a significant issue within the regression model, as supported by the findings of Greene (2003), Hair et al (2010), and Liu & Ritter.

Impact regression results of CSR implementation on FDR

After assessing the linear multi-additive relationships between the independent and control variables, the author determined that linear multi-addition is not an issue Subsequently, STATA 17 software was employed to perform regression analysis on the constructed model scale.

Table 3.4 Multivariate regression results for the impact of CSR on FDR

(Source: Data from Stata 17 software)

The analysis of Corporate Social Responsibility (CSR) on the financial distress risk of plastic-chemical manufacturing firms from 2019 to 2023, as indicated by the Z-score index, is detailed in Table 3.4 The study employed various statistical methods, including Ordinary Least Squares (Pooled OLS), Fixed Effect Model (FEM), and Random Effect Model (REM), to assess the impact of CSR on corporate financial stability.

To assess the compatibility between the Ordinary Least Squares (OLS) model and the Fixed Effects Model (FEM), the author employs the F test The findings from the F test indicate that the probability value (Prob>F) is significant.

The analysis indicates that a random effects model (REM) is more appropriate than the Pooled OLS model, as evidenced by a Breusch-Pagan test where Prob > chibar2 = 0.22% is less than 5% Further testing with the Hausman test revealed that the fixed effects model (FEM) is the most suitable for the study, with Prob > F = 0.00% also below the 5% threshold This suggests that the independent and control variables effectively explain the variability of the dependent variable.

3.5.2 Inspection of FEM model defects

Table 3.5 Heteroskedasticity test results for FEM model Chi2(50) 2.4E+05

(Source: Data from Stata 17 software)

The author utilized the "xttest3" command to assess heteroskedasticity in the Fixed Effects Model (FEM) As indicated in Table 3.5, the P-value is 0.00%, which is below the 5% threshold Consequently, this suggests that the FEM model exhibits heteroskedasticity.

(2) Testing the phenomenon of autocorrelation

H0: The model has no autocorrelation

Table 3.6: Autocorrelation phenomena test results for FEM model

(Source: Data from Stata 17 software)

To examine the autocorrelation phenomenon in the FEM model, the author employed the Wooldridge test The findings indicate a significant correlation, as the probability value (Prob > F) of 0.00% is below the 5% threshold, leading to the acceptance of the alternative hypothesis (H1) and the rejection of the null hypothesis (H0).

After analyzing the issues of variable variance and self-correlation within the study model, the author identified significant flaws To address these problems and enhance the reliability and significance of the research model, the author employed the generalized least squares (GLS) technique.

Table 3.7: Results of overcoming FEM model defects

Z_score Coefficient Std err with P > |z|

(Source: Data from Stata 17 software)

Table 3.7 presents regression results that confirm the positive correlation between Corporate Social Responsibility (CSR) and Financial Distress Risk (FDR) using the generalized least squares (GLS) method The analysis indicates a statistically significant relationship, with a p-value of less than 0.01, suggesting that higher CSR levels correspond to a reduced risk of corporate financial exhaustion These findings align with previous research, which highlights that companies prioritizing social responsibility often enjoy higher accountability ratings and improved access to funding sources Consequently, the results affirm the research hypothesis, demonstrating that CSR positively influences the reduction of FDR in businesses.

The Size variable exhibits a positive and statistically significant correlation with the Z_score, aligning with the findings of Boubaker et al (2020) while contrasting with Al-Hadi et al (2019) The ROA variable, indicative of a company's asset management efficiency, also shows a positive regression coefficient and significant correlation with the Z_score, suggesting effective management and high asset utilization Conversely, the Quick and Loss variables are negatively correlated with the Z_score, indicating that a higher quick payout ratio and elevated loss ratio increase the risk of corporate bankruptcy A high Quick index may signal good liquidity; however, it could also indicate underutilization of financial resources and low capital efficiency Additionally, a prolonged period of operating losses heightens bankruptcy risk for the enterprise.

The regression analysis indicates that while there is a relationship between Leverage, Cash, and R&D variables and financial distress risk, the high p-values suggest that these variables are not significantly associated with corporate financial distress.

Table 3.8: Summary of FEM model inspection results

Z_score Expected result Actual Result

Conclusions and recommendations

Conclusion

The CSR impact study on FDR analyzes 50 plastic-chemical companies listed on the Vietnamese stock market from 2019 to 2023, utilizing linear regression models with OLS, FEM, REM, and FGLS estimation methods Comprehensive tests for multicollinearity, heteroskedasticity, and autocorrelation were conducted to ensure accurate estimations CSR is measured by assessing four key aspects: Environment, labor, communities, and products, based on sustainable development information in annual financial statements The findings indicate that CSR significantly reduces FDR, supporting Stakeholder Theory, which emphasizes the importance of businesses' responsibilities to society and stakeholders alongside profit maximization.

Recommendations

Investing in Corporate Social Responsibility (CSR) is increasingly recognized as a vital trend that enhances financial performance and mitigates risks for companies in Vietnam's evolving economy As businesses across various sectors show growing interest in CSR, its integration into business practices during international market integration becomes essential, yielding mutual benefits for both organizations and society This focus on CSR not only boosts the competitiveness of publicly listed companies but also highlights the necessity for policies encouraging CSR reporting Based on empirical findings, this study recommends strategies to elevate the significance of CSR in Vietnam, aiding both the government and businesses in optimizing CSR implementation.

The study reveals that strong corporate social responsibility (CSR) practices significantly reduce the risk of financial distress for companies This indicates that greater adherence to social responsibility correlates with lower financial risk These findings will assist managers in developing operational strategies and financial management policies that encourage the implementation of effective CSR initiatives.

Promoting awareness of social responsibility (CSR) is crucial for enhancing a business's financial performance Company leaders and senior managers must adopt a positive mindset towards CSR, as their decisions shape business strategy and overall performance Investing in CSR goes beyond ethics and charitable efforts; it is essential to recognize its broader implications Thoughtful CSR investments can yield economic benefits rather than being seen as mere expenses A strong understanding of CSR can provide organizations with a competitive edge, motivating managers to integrate CSR activities into business strategies and engage in initiatives that benefit both the company and its stakeholders.

To effectively implement Corporate Social Responsibility (CSR), businesses must develop a long-term strategy with clear, step-by-step actions This involves identifying sustainable strategies that align with social responsibility standards, requiring awareness, resources, financial capital, technology, and skilled human resources A well-structured CSR plan not only meets established standards but also gains acceptance from stakeholders, fostering the sustainable development of both the company and the nation In Vietnam's context, where integration into the global economy is crucial, adopting CSR practices is essential for attracting foreign investment.

To enhance environmental management and product quality, businesses must shift their focus from mere profit maximization to a more sustainable approach This change begins with training programs for managers that emphasize legal knowledge in these areas By developing and implementing comprehensive environmental management plans aligned with sustainable development strategies, companies can improve their financial performance and reputation Effective corporate social responsibility (CSR) practices not only ensure a safe working environment but also promote the health of employees, ultimately stabilizing productivity and benefiting the wider community.

To mitigate legal risks and avoid sanctions, businesses must fully comply with environmental management and product safety regulations Additionally, incorporating recycled materials into production processes can enhance financial efficiency and foster consumer trust, ultimately boosting loyalty to the brand.

In Vietnam, the notification of Corporate Social Responsibility (CSR) implementation by enterprises to stakeholders, including domestic and foreign investors, authorities, and consumers, is largely voluntary and lacks comprehensive guidelines, with the exception of the consolidated GRI from 2016 and criteria outlined in Circular 155/TT-BCT/2015 Consequently, the information disclosed by enterprises often falls short of covering all relevant criteria, highlighting the need for enhanced CSR reporting to effectively engage and attract investors and stakeholders.

The thesis research highlights the spontaneous mindset of enterprises regarding Corporate Social Responsibility (CSR), emphasizing that CSR measurement relies solely on the financial statements published by these companies Currently, CSR implementation lacks proper orientation and assessment by authorities, leading to insufficient transparency in the reporting of CSR activities In light of these challenges, the thesis proposes several related recommendations.

Authorities play a crucial role in guiding Corporate Social Responsibility (CSR) activities by providing essential information to the private sector on CSR implementation This enables businesses to develop sustainable development strategies that align with their internal resources and societal needs While various CSR codes of conduct exist, their application often varies based on individual business perspectives, leading to inconsistency Therefore, the information and implementation guidelines provided by authorities can enhance businesses' understanding of CSR across industries and equip them with strategic insights for effective CSR execution.

The involvement of authorities in developing a CSR implementation capacity assessment scale in Vietnam is increasingly urgent Currently, mandatory disclosure of CSR-related information is limited to the sustainable reporting guidelines for listed enterprises outlined in Circular 155 (Ministry of Finance, 2015) Unlike in developed countries, where non-governmental organizations and credit rating agencies actively measure and publish CSR performance indicators, Vietnam lacks a structured approach to CSR evaluation Therefore, it is essential to establish a roadmap for creating CSR assessment organizations to advance beyond mere information disclosure.

To enhance awareness of corporate social responsibility (CSR), it is essential to strengthen government-led initiatives and policies that encourage businesses to adopt CSR practices Collaborative efforts between the government and enterprises can be facilitated through workshops and direct dialogues, highlighting the significance of CSR for both individual businesses and the nation's sustainable development Effective communication should emphasize the various aspects of CSR and the benefits to stakeholders that positively influence business financial performance By increasing CSR awareness among businesses, Vietnam can pave the way toward a more sustainable economy.

Transparency in assessing Corporate Social Responsibility (CSR) implementation necessitates that authorities clearly define their roles through regulations on monitoring and reporting, holding enterprises accountable for their CSR commitments These regulations encourage businesses to uphold their commitments by integrating them into financial statements As companies engage in CSR initiatives, they face stringent monitoring standards, which indirectly enhance their corporate governance quality and promote a balance between stakeholder interests and sustainable development.

Building sustainable business models is crucial for enhancing social responsibility within the business community and promoting environmentally friendly production practices As trends like sustainable business models, cleaner production, and environmental technology gain momentum, companies must navigate challenges such as limited capital, insufficient information, and low management capacity during implementation.

Vietnamese enterprises often view Corporate Social Responsibility (CSR) as a cost rather than an investment, leading to limited interest and implementation, especially among listed companies A study highlighted in chapter 3 reveals that the current state of CSR in these enterprises remains inadequate With capital constraints being a significant challenge, businesses prioritize short-term economic gains over long-term development benefits, viewing CSR efforts as an additional burden rather than a strategic opportunity.

Based on the results of a quantitative study on the impact of CSR on FDR with

50 listed companies over 5 years, it is shown that the more businesses comply with CSR, the lower the risk of financial distress This implies that businesses investing in

CSR have better financial stability, which can gain a higher level of trust from investors in the market

Information on Corporate Social Responsibility (CSR) is crucial for investors assessing business performance, particularly when selecting portfolios for long-term investment strategies in the stock market.

Limitations of the study

The thesis presents notable limitations, primarily focusing on a research sample of listed non-financial enterprises within the plastic-chemical industry, while excluding financial institutions like banks Given that over 40% of the top companies in Vietnam's VN30 index are banks, their role in achieving sustainable development goals is crucial and warrants further exploration Additionally, the study's data, collected from 2019 to 2023, is relatively short, presenting an opportunity for future research to investigate the relationship between CSR activities and FDR issues over a longer timeframe Furthermore, the evaluation of CSR is based on annual and sustainability reports, which lack uniform presentation, complicating the scoring and comparison process and potentially introducing subjective biases in the evaluation.

Recommendations for future studies

For this study, the FDR variable was measured by the Z_score index (Altman,

Regression results indicated a positive relationship between Corporate Social Responsibility (CSR) and Financial Distress Risk (FDR), paving the way for future research to explore additional FDR metrics like O_score and Zm_score Future studies should address endogenous issues in the research model by employing instrumental variables and GMM models, while also incorporating lag variables To comprehensively assess the overall impact of CSR on corporate financial distress risk, researchers are encouraged to broaden the dataset across various industry groups, particularly focusing on the financial sector, and to extend the duration of the study.

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APPENDIX Appendix 1 CSR scoring criteria of enterprises

Horse Environmental Responsibility Criteria (CSR_EN)

1 Does the company mention the issue of using raw materials in the production and business process?

2 Does the company mention energy consumption?

3 Does the company mention the issue of using and saving water in the production and business process?

4 Does the company address emissions to the surrounding environment where you operate?

5 Does the company address the issue of treating your wastewater and waste into the environment?

6 Does the company mention the development of policies on environmental protection?

7 Does the company express its concern about ambient issues?

8 Does the company mention developing plans for your environmental investment policy?

Labor Responsibility Criteria (CSR_LA)

1 Does the company mention the issue of ensuring occupational safety and health for employees?

2 Does the company address the issue of education and training for employees?

3 Does the company mention the dissemination of internal information, legal policies related to rights and obligations for employees?

4 Does the company mention wage policies for employees?

5 Does the company mention benefits (social insurance, health insurance, entertainment, entertainment, sports, culture and arts, other emulation movements, support, etc.) for employees and their family members?

6 Does the company mention the issue of rewarding and rewarding employees for excellent work?

Community Responsibility Criteria (CSR_CM)

1 Does the company report local community involvement and activities?

2 Does the company mention participating in activities to support the disabled, the elderly, the lonely and the poor?

3 Does the company mention participating in activities that contribute/sponsor charitable, humanitarian and charitable programs?

4 Does the company mention sponsorship and support for educational and intellectual incubation activities?

5 Does the company mention sponsoring and advocating for healthcare services?

Product Responsibility Criteria (CSR_PR)

1 Does the company mention the safety and health of your customers?

2 Does the company mention providing full information and full labeling of products and services to customers?

3 Does the company mention product quality?

4 Does the company mention customer satisfaction after using your products or services?

(Source: Ho Thi Van Anh, 2017)

(Assess student's work attitudes during the writing process, assess work effort and efficiency, student's regular contact with instructor…)