The Impact of Social Responsibility Performance on Financial Turmoil over the Firm’s Life Cycle Using the Directional Distance Function

In recent years, high inflation has caused many problems for companies. The financial turmoil has caused companies to lose their value due to the imposition of capital costs and the inability to attract foreign capital and to get a poor rating compared to their competitors. Companies try to satisfy shareholders and stakeholders by reducing risk and increasing company value. Stakeholder concerns about financial turmoil are seen as a positive factor in ameliorating financial turmoil. Therefore, it can lead managers to find the right solution. There are several ways to reduce company risk and avoid financial turmoil. In the current economy, one of the most important ways to satisfy shareholders, stakeholders, and institutions is to provide activities related to social responsibility and pay attention to it. Today, corporate social responsibility is considered one of the most important financial issues. One of the ways out of these problems is to increase the social responsibility performance of the company. Considering the various results presented in this field, it seems necessary to conduct more research in this field to obtain reasonable results. Most of these problems are affected by life cycle stages. So; Compliance with social responsibility at different stages can help the company's sustainability. On the other hand, the impact of social responsibility on financial volatility depends on economic changes and developments, which vary throughout the life cycle. And the impact of CSR may not be the same in all stages of the life cycle. In this research, two goals have been pursued, one is to investigate the effect of social responsibility performance on financial turbulence without considering the life cycle. Another is to examine the impact of corporate social responsibility performance on financial turmoil over the life cycle. Therefore, the purpose of this study is to investigate the effect of social responsibility performance on financial turbulence during the company's life cycle for a period of ten years.

The statistical sample of this research includes 112 active listed companies during the period of 2009 to 2019. To measure the performance variable of the company's social responsibility, using the website of Tehran Stock Exchange and the website of Kodal, about 36,000 pages of reports of the activities of the board of directors during the considered years were studied, and the scores of each dimension of the company's social responsibility were inserted in an Excel file. and finally, using the mathematical method (directed distance function), the social responsibility performance of companies was evaluated. Berger et al., Almeida, Campello and Altman models have been used to measure financial turbulence. Research hypotheses have been tested using panel data and fixed effects by multivariate regression statistical method.

The results show that the performance of social responsibility either in general or in detail, regardless of the company's life cycle, alone cannot reduce financial turmoil. The variable combination of the company's social responsibility performance with the life cycle in the stages of growth and maturity shows a significant and decreasing effect on financial turmoil. In fact, it can be said that corporate social responsibility performance and life cycle jointly reduce financial turmoil. The combination of social responsibility performance with the life cycle has a positive and significant effect on financial turbulence in the recession stage and has no effect in the decline stage.

Companies can reduce business risk and financial turbulence through social responsibility management. Companies that have a high social responsibility performance have more credibility. This makes it easier for companies to access financial resources. Therefore, companies try to attract the opinion of their shareholders and stakeholders in different ways, in order to attract more capital and suffer less financial turmoil. As companies compete more in the stages of growth and maturity than in other stages of the life cycle, they pay more attention to social responsibility; Therefore; Based on the results, it can be concluded that the life cycle of the company and the performance of social responsibility jointly reduce financial turmoil.The results of the research showed that the life cycle moderates the relationship between social responsibility performance and financial turmoil and plays an important role. In such a way the companies that are in the maturity stage can reduce the financial turmoil by increasing the performance of social responsibility. Therefore, it seems that the results can be of great help to investors and stakeholders. Therefore, in order to reduce the risk of their investment, investors and users are suggested to examine the companies in terms of their life cycle and choose companies that are in the maturity period and have high financial resources, and also enjoy high social responsibility performance. Because investing in such companies will reduce the investment risk and the investor's concern will be reduced.