This study investigates the relationship between corporate social responsibility (CSR), capital structure, and financial distress in Jordan’s financial services sector. It tests the mediating effect of capital structure on the CSR-distress linkage. Utilizing a panel data regression approach, the analysis examines a sample of 35 Jordanian banks and insurance firms from 2015–2020. CSR is evaluated through content analysis of sustainability disclosures. Financial distress is measured using Altman’s Z-score model. The findings reveal an insignificant association between aggregated CSR engagement and bankruptcy risk. However, capital structure significantly mediates the impact of CSR on financial distress. Specifically, enhanced CSR enables higher leverage capacity, subsequently escalating distress risk. The results advance academic literature on the nuanced pathways linking CSR to financial vulnerability. For practitioners, optimally balancing CSR and financial sustainability is recommended to strengthen resilience. This study provides novel empirical evidence on the contingent nature of CSR financial impacts within Jordan’s understudied financial services sector. The conclusions offer timely insights to inform policies aimed at achieving sustainable and stable financial sector development.

Abu Serdaneh, J. (2021). Corporate governance structure and financial performance of conventional and Islamic banks: evidence from Gulf Cooperation Council countries. International Journal of Islamic and Middle Eastern Finance and Management.

Alafi, K., Al-Sufy, F.J. (2012). Corporate social responsibility practices from Islamic perspective: a study of the banking sector in Jordan. Middle-East Journal of Scientific Research, 12(10), 1333–1339.

Al-Hadi, A., Hasan, M. M., & Habib, A. (2017). Risk management and corporate governance. Corporate Governance: The International Journal of Business in Society.

Allison, P. D. (2012). When can you safely ignore multicollinearity? Available online: https://statisticalhorizons.com/multicollinearity (accessed on 17 November 2023).

Almadi, A. A. M., Al-Marzouq, M., & Al-Saleh, N. (2021). Corporate governance and financial distress: evidence from GCC countries. Journal of Economic and Administrative Sciences.

Al-Msiedeen, J. M. (2019). The influence of corporate governance practices on firm performance and efficiency: evidence from Jordan [PhD thesis]. University of Southern Queensland.

Al-Thuneibat, A. A., Al-Angari, H. S., & Alghamdi, A. S. (2022). The stationary and unit root tests: application on oil prices. International Journal of Energy Economics and Policy, 12(1), 55–61.

Altman, E. I. (1984). A Further Empirical Investigation of the Bankruptcy Cost Question. The Journal of Finance, 39(4), 1067–1089. Portico. https://doi.org/10.1111/j.1540-6261.1984.tb03893.x

Altman, E. I. (2000). Predicting financial distress of companies: Revisiting the Z-score and ZETA models. Available online: https://pages.stern.nyu.edu/~ealtman/Zscores.pdf (accessed on 20 January 2023).

Arsoy, A. P., Arabaci, U., & Çiftçioğlu, A. (2012). Corporate sustainability and responsibility in emerging markets. The Journal of Accounting and Finance, 53, 33–48.

Bae, K. H., Kang, J. K., Wang, J. (2019). Corporate social responsibility and capital structure. Journal of Corporate Finance, 56, 28–51.

Barnett, M. L. (2016). The Business Case for Corporate Social Responsibility. Business & Society, 58(1), 167–190. https://doi.org/10.1177/0007650316660044

Bole, V., & Rebec, P. (2013). Bootstrapping the Hausman Test in Panel Data Models. Communications in Statistics—Simulation and Computation, 42(3), 650–670. https://doi.org/10.1080/03610918.2011.650261

Bouslah, O., Kryzanowski, L., & Zanellato, B. M. (2018). Social performance and financial distress. Journal of Corporate Finance, 53, 123–147.

Central Bank of Jordan (CBJ). (2022). Monthly Statistical Bulletin. Available online: https://www.cbj.gov.jo/Pages/viewpage.aspx?pageID=181 (accessed on 17 January 2023).

Chen, S., & Shen, Z.-D. (2020). Financial Distress Prediction Using Hybrid Machine Learning Techniques. Asian Journal of Economics, Business and Accounting, 1–12. https://doi.org/10.9734/ajeba/2020/v16i230231

Cheng, B., Ioannou, I., & Serafeim, G. (2013). Corporate social responsibility and access to finance. Strategic Management Journal, 35(1), 1–23. Portico. https://doi.org/10.1002/smj.2131

Cui, J., Jo, H., & Na, H. (2016). Does Corporate Social Responsibility Affect Information Asymmetry? Journal of Business Ethics, 148(3), 549–572. https://doi.org/10.1007/s10551-015-3003-8

Dirman, P.R. (2020). The effect of profitability on financial distress with managerial ownership as moderating variable. Journal Akuntansi, 24(3), 457–468.

Ehsan, S., Suleman, T. (2021). The impact of leverage on financial distress: empirical evidence from Pakistan. Journal of Asian Finance, Economics and Business, 8(1), 723–733.

El Ghoul, S., Guedhami, O., Kwok, C. C. Y., et al. (2011). Does corporate social responsibility affect the cost of capital? Journal of Banking & Finance, 35(9), 2388–2406. https://doi.org/10.1016/j.jbankfin.2011.02.007

El-Halaby, S., Haddad, A.E., Samaha, K., et al. (2022). Environmental sustainability and financial performance in times of uncertainty: Evidence from GCC Islamic banks. Journal of Cleaner Production, 343, 130582.

Farrar, D. E., & Glauber, R. R. (1967). Multicollinearity in Regression Analysis: The Problem Revisited. The Review of Economics and Statistics, 49(1), 92. https://doi.org/10.2307/1937887

Giannarakis, G. (2014). Corporate governance and financial characteristic effects on the extent of corporate social responsibility disclosure. Social Responsibility Journal, 10(4), 569–590. https://doi.org/10.1108/srj-02-2013-0008

Gobenvy, X. (2014). The influence of company’s profitability to financial distress on manufacturing companies. Journal of Chemical Information and Modeling, 53(9), 1689–1699.

Goss, A., & Roberts, G. S. (2011). The impact of corporate social responsibility on the cost of bank loans. Journal of Banking & Finance, 35(7), 1794–1810. https://doi.org/10.1016/j.jbankfin.2010.12.002

Grabinska, B., Kedzior, D., Kedzior, M., et al. (2021). The Impact of CSR on the Capital Structure of High-Tech Companies in Poland. Sustainability, 13(10), 5467. https://doi.org/10.3390/su13105467

Greene, W. H. (2008). Econometric analysis, 6th ed. Pearson Prentice Hall.

Gujarati, D. N., Porter, D. C. (2008). Basic econometrics, 5th ed. McGraw-Hill Education.

Hair, J. F., Black W. C., Babin B J., et al. (2009). Multivariate data analysis, 7th ed. Pearson.

Hajiha, Z., Sarfaraz, A. (2013). The impact of corporate social responsibility disclosure on the financial performance of companies listed on the Tehran Stock Exchange. Management Science Letters, 3(6), 1985–1992.

Harwell, M. R., Serlin, R. C. (1997). An empirical study of five multivariate tests for the single-factor repeated measures model. Communications in Statistics—Simulation and Computation, 26(2), 605–618. https://doi.org/10.1080/03610919708813400

Hayes, A. F., Cai, L. (2007). Using heteroskedasticity-consistent standard error estimators in OLS regression: An introduction and software implementation. Behavior Research Methods, 39(4), 709–722. https://doi.org/10.3758/bf03192961

Hinson, R., Boateng, R., & Madichie, N. (2010). Corporate social responsibility activity reportage on bank websites in Ghana. International Journal of Bank Marketing, 28(7), 498–518. https://doi.org/10.1108/02652321011085176

Hinson, R., Boateng, R., & Madichie, N. (2010). Corporate social responsibility activity reportage on bank websites in Ghana. International Journal of Bank Marketing, 28(7), 498–518. https://doi.org/10.1108/02652321011085176

Huang, C. L., Chen, X., Zhao, X. R. (2021). Corporate social responsibility, financial leverage and earnings management-Evidence from China. Pacific Accounting Review.

Hunjra, A. I., Raza, S. A., Bakhsh, K., et al. (2020). Capital Structure Determinants and Firm Value: Empirical Evidence from Pakistan. Corporate Social Responsibility and Environmental Management, 27(5), 2091–2107.

Ioannou, I., Serafeim, G., & Cheng, B. (2012). Corporate Social Responsibility and Access to Finance. Academy of Management Proceedings, 2012(1), 10912. https://doi.org/10.5465/ambpp.2012.10912abstract

Jensen, M. C., Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of financial economics, 3(4), 305–360. https://doi.org/10.1016/0304-405X(76)90026-X

Jizi, M., Dixon, R. (2022). CSR and risk: Evidence from the US banking sector. Journal of Cleaner Production, 294, 126315.

Kabir, R., & Thai, H. M. (2017). Does corporate governance shape the relationship between corporate social responsibility and financial performance? Pacific Accounting Review, 29(2), 227–258. https://doi.org/10.1108/par-10-2016-0091

Kanwal, T., Khanam, F., Nasreen, S., et al. (2021). Impact of corporate social responsibility on financial distress in textile sector of Pakistan. Journal of Public Affairs, 21(4), e2532.

Kennedy, P. (2003). A guide to econometrics, 5th ed. MIT Press.

Kouser, R., Bhatti, K., & Azeem, M. (2012). Inter-relationship between profitability, size, growth and leverage: A case of non-financial firms from Pakistan. Pakistan Journal of Commerce and Social Sciences, 6(2), 405–419.

Krishnamurti, C., Sevic, A., & Sevic, Z. (2016). Voluntary disclosure, corporate governance and financial distress. Pacific-Basin Finance Journal, 37, 1–25.

Kuo, T.-C., Chen, H.-M., & Meng, H.-M. (2021). Do corporate social responsibility practices improve financial performance? A case study of airline companies. Journal of Cleaner Production, 310, 127380. https://doi.org/10.1016/j.jclepro.2021.127380

Levin, A., Lin, C. F., & Chu, C. S. J. (2002). Unit root tests in panel data: asymptotic and finite-sample properties. Journal of Econometrics, 108(1), 1–24. https://doi.org/10.1016/S0304-4076(01)00098-7

Li, F., Lundholm, R., & Minnis, M. (2014). The predictive power of financial and nonfinancial information. Working paper.

Li, M. L., Luo, R. H., Wang, P., et al. (2018). Family involvement, corporate social responsibility and corporate financial distress. Journal of Business Research, 92, 201–210.

Lin, Y. P., Cheng, Y. S., Liu, H. W., et al. (2020). Corporate social responsibility strategy, financial distress and credit ratings. Journal of Business Research, 117, 166–176.

Lins, K. V., Servaes, H., & Tamayo, A. (2017). Social Capital, Trust, and Firm Performance: The Value of Corporate Social Responsibility during the Financial Crisis. The Journal of Finance, 72(4), 1785–1824. Portico. https://doi.org/10.1111/jofi.12505

Long, J. S., & Ervin, L. H. (2000). Using Heteroscedasticity Consistent Standard Errors in the Linear Regression Model. The American Statistician, 54(3), 217–224. https://doi.org/10.1080/00031305.2000.10474549

Mansfield, E. R., & Helms, B. P. (1982). Detecting Multicollinearity. The American Statistician, 36(3a), 158–160. https://doi.org/10.1080/00031305.1982.10482818

Masood, O., Frynas, J. G. (2022). Institutional determinants of corporate social responsibility reporting: Evidence from the banking sector in Pakistan. Business & Society, 61(1), 234–267.

Mayskaya, T., Hajek, M. (2019). Corporate sustainability performance and financial distress likelihood. Journal of Business Ethics, 175(2), 175–192.

Mellado, L., & Parte, L. (2017). Determinants of corporate lobbying intensity in the lease standard-setting process. Revista de Contabilidad, 20(2), 131–142. https://doi.org/10.1016/j.rcsar.2016.09.001

Muñoz, R., Pablo, J., Salinero, Y., et al. (2020). Risk measures and the risk-return paradox: an analysis in the context of the economic crisis. Review of Business Management, 22(2), 348–362. https://doi.org/10.7819/rbgn.v22i2.4049

Myers, S. C. (1977). Determinants of corporate borrowing. Journal of financial economics, 5(2), 147–175. https://doi.org/10.1016/0304-405X(77)90015-0

O’brien, R. M. (2007). A Caution Regarding Rules of Thumb for Variance Inflation Factors. Quality & Quantity, 41(5), 673–690. https://doi.org/10.1007/s11135-006-9018-6

Omet, G., Mashharawe, F., & Jaara, Z. (2015). Financial performance evaluation of insurance sector—The case of Jordan. Research Journal of Finance and Accounting, 6(2), 101–108.

Orlitzky, M., Schmidt, F. L., & Rynes, S. L. (2003). Corporate Social and Financial Performance: A Meta-Analysis. Organization Studies, 24(3), 403–441. https://doi.org/10.1177/0170840603024003910

Outecheva, N. (2007). Corporate financial distress: An empirical analysis of distress risk [PhD thesis]. University of St. Gallen.

Öztekin, Ö. (2015). Capital Structure Decisions around the World: Which Factors Are Reliably Important? Journal of Financial and Quantitative Analysis, 50(3), 301–323. https://doi.org/10.1017/s0022109014000660

Park, J., Lee, H., Kim, C. (2020). Corporate social responsibilities, consumer trust and corporate reputation: South Korean consumers’ perspectives. Journal of Business Research, 103, 592–601.

Saeidi, S. P., Sofian, S., Saeidi, P., et al. (2019). Corporate social responsibility and financial performance: Evidence from top 50 public listed companies in Malaysia. Sustainability, 11(22), 6581.

Sbeiti, W. M., & Qasim, A. (2021). Covid-19 pandemic and the inefficient Jordanian financial sector. Finance Research Letters, 38, 101818.

Scholtens, B. (2011). Corporate social responsibility in the international insurance industry. Sustainable Development, 19(2), 143–156. Portico. https://doi.org/10.1002/sd.513

Shen, C. H., Wu, M. W., Chen, T. H., & Fang, H. (2021). To do good is to do well? Corporate social responsibility and capital structure. Pacific-Basin Finance Journal, 67, 101556.

Shim J. K., Siegel, J. G. (1998). Financial Management. Available online: https://mesaeedakbar.files.wordpress.com/2015/11/schaums-financial-management-498.pdf (accessed on 20 January 2023).

Sharfman, M. P., & Fernando, C. S. (2008). Environmental risk management and the cost of capital. Strategic Management Journal, 29(6), 569–592. Portico. https://doi.org/10.1002/smj.678

Sun, W., & Ding, Y. (2020). Corporate social responsibility and cash flow volatility: The curvilinear moderation of marketing capability. Journal of Business Research, 116, 48–59. https://doi.org/10.1016/j.jbusres.2020.05.016

Taani, K., Banykhaled, H. Y. (2021). Audit quality, debt financing, and financial distress: Evidence from Jordan. Journal of Asian Finance, Economics and Business, 8(1), 771–782.

Tabachnick, B. G., Fidell, L. S. (2007). Using multivariate statistics, 5th ed. Allyn and Bacon.

Tian, G., Zhang, Z., & Li, D. (2015). Bankruptcy prediction using option pricing theory. Journal of Banking & Finance, 52, 219–229.

Torres-Reyna, O. (2007). Panel data analysis fixed and random effects using Stata (v. 4.2). Available online: https://tertilt.vwl.uni-mannheim.de/bachelor/Panel101.pdf (accessed on 20 November 2023).

Udayasankar, K. (2007). Corporate Social Responsibility and Firm Size. Journal of Business Ethics, 83(2), 167–175. https://doi.org/10.1007/s10551-007-9609-8

Ufo, A. (2015). Impact of Financial Distress on the Liquidity of Selected Manufacturing Firms of Ethiopia. Journal of Poverty, Investment and Development, 16.

Waddock, S. A., Graves, S. B. (1997). The corporate social performance-financial performance link. Strategic Management Journal, 18(4), 303–319. https://doi.org/10.1002/(SICI)1097-0266(199704)18:4<303::AID-SMJ869>3.0.CO;2-G

Wang, J., Wang, X. (2020). Benefits of corporate social responsibility in high financial leverage firms. Emerging Markets Review, 43, 100671.

Wang, Q., Li, R. (2021). Corporate social responsibility and financial distress risk in China. Finance Research Letters, 38, 101631.

Williams, R. (2015). Heteroskedasticity. Available online: https://www3.nd.edu/~rwilliam/stats2/l25.pdf (accessed on 19 February 2023).

Wooldridge, J. M. (2013). Introductory econometrics: A modern approach, 5th ed. Available online: https://cbpbu.ac.in/userfiles/file/2020/STUDY_MAT/ECO/2.pdf (accessed on 20 November 2023).

Xu, N., Lee, M. T. (2019). Different shades of green: Does corporate environmental reputation mitigate the harm of environmental violations? Business Strategy and the Environment, 29(8), 3235–3246.

Xu, X., Lee, K. H. (2019). The effect of corporate social responsibility on financial distress: Empirical evidence from US firms. Sustainability, 11(7), 1860.

Zuur, A. F., Ieno, E. N., & Elphick, C. S. (2009). A protocol for data exploration to avoid common statistical problems. Methods in Ecology and Evolution, 1(1), 3–14. Portico. https://doi.org/10.1111/j.2041-210x.2009.00001.x