Bidirectional Relationship Between Corporate Social Responsibility and Financial Distress of Firms in Emerging African Countries: Evidence From Wavelet Enhanced <scp>QQR</scp> Models

ABSTRACT This study investigates the bidirectional relationship between corporate social responsibility (CSR) and financial distress across selected African emerging markets from 2012 to 2023. While CSR is widely considered a strategic asset that enhances firm resilience, limited empirical research has explored its dual role as both a safeguard and a potential source of financial vulnerability, particularly within under‐institutionalized contexts. Using firm‐level CSR disclosures aligned with GRI standards and financial distress measured via the Altman Z ‐score, the study applies a wavelet‐enhanced quantile‐on‐quantile regression (WE‐QQR), wavelet‐enhanced multivariate quantile‐on‐quantile regression (WE‐MQQR), and the bootstrapped causality‐in‐quantiles (CiQ) method to capture nonlinear, asymmetric, and quantile‐dependent dynamics. The findings reveal a bidirectional but asymmetric relationship between CSR and financial distress across all estimation frameworks. The WE‐QQR and WE‐MQQR surfaces show that CSR consistently lowers distress risk, with the strongest effects observed among firms in moderate‐to‐weak financial positions, lending support to the risk‐mitigation hypothesis. Conversely, financial distress suppresses CSR engagement, particularly for firms with limited governance strength or liquidity buffers, indicating that distress constrains discretionary social investment. These patterns differ across African countries, reflecting variation in regulatory enforcement, capital‐market depth, and stakeholder pressure. Robustness checks using the CiQ approach confirm distribution‐dependent two‐way causality: CSR exerts its strongest predictive influence in the lower quantiles of financial health, while distress has its largest effect on CSR in the middle quantiles of CSR intensity. Complementary 2SLS and 3SLS estimations further validate this reciprocity after accounting for endogeneity and simultaneous determination. The study contributes to the literature by contextualizing the CSR–distress nexus within African institutional heterogeneity and by highlighting the tail‐dependent nature of these interactions.