Impact of Corporate Governance and Corporate Social Responsibility on Credit and Liquidity Risk: Evidence from Brics

Abstract

This study examines whether Corporate Governance (CG) mechanisms and Corporate Social Responsibility (CSR) practices influence credit risk (CR) and liquidity risk (LR) among publicly listed non-financial firms in the BRICS economies (Brazil, Russia, India, China, and South Africa). Using a longitudinal panel of 500 firms from 2014–2024, the study integrates CG, CSR, and macroeconomic factors to assess their impact on financial risk. The results show that board size, board independence, board meeting frequency, and CSR activities do not significantly reduce either credit or liquidity risk, indicating a limited effectiveness of formal governance and sustainability structures in emerging markets. These findings challenge the universal applicability of agency and stakeholder theories, suggesting that institutional weaknesses such as weak enforcement, political influence, and low-quality disclosure reduce the effectiveness of CG and CSR mechanisms. Among control variables, inflation strongly predicts liquidity risk, while profitability provides only limited protection against solvency pressures. Overall, the study provides new evidence that CG and CSR, in their current institutional form, do not significantly mitigate credit and liquidity risk in BRICS firms.