Natural resource intensity and financial distress dynamics: an empirical investigation across South Asian energy firms

Purpose This study aims to examine the relationship between natural resource inefficiency, measured by the Natural Resource Intensity Ratio (NRIR), and financial distress among energy firms in South Asia. This study further examines the moderating role of firm size and the country-specific effects of NRIR in Bangladesh, India and Pakistan. Design/methodology/approach This study uses 300 firm-year observations (2015–2024) covering all 30 listed energy firms in the three markets that satisfy the continuous-listing and resource-cost disclosure criteria. Financial distress is measured through Altman’s Z-score and Ohlson’s O-score. Estimation uses fixed effects, cluster-robust variance estimation, PCSE, Driscoll–Kraay standard errors, the system generalised method of moments and further robustness checks. Findings Higher NRIR is associated with lower Z-scores and higher O-scores, indicating increased financial distress. Firm size moderates this relationship, and the NRIR–distress slope varies across markets: the total marginal effect is steepest in Pakistan (−21.44), followed by India (−13.59) and Bangladesh (−9.79). Research limitations/implications This study covers listed fuel and power sector companies in three South Asian countries, so caution is required in generalising the results to other sectors or economies. Practical implications The results of this study indicate that improving natural resource-use efficiency can materially reduce financial distress. Because the estimated slope differs across markets, country-specific measures are proposed. Originality/value This research integrates NRIR into financial distress models, offering multi-country, firm-level evidence for South Asia, where existing work is predominantly macroeconomic. The results supplement the sustainability discourse by identifying the financial risks posed by resource inefficiency in the energy sector.