Financial Ratios on Reducing Financial Distress Moderated by ESG

Abstract

This study investigates the influence of financial ratios, including leverage, liquidity, operating capacity, and operating cash flow, on financial distress among NASDAQ-100 companies from 2013 to 2023. Using panel data regression on 700 firm-year observations, the results reveal that leverage increases financial distress, while liquidity, operating capacity, and operating cash flow help reduce it. Moreover, ESG disclosure plays a dual role: it directly contributes to reducing financial distress and significantly moderates the relationship between liquidity and distress. These findings support stakeholder theory and underscore the importance of integrating financial fundamentals with transparent ESG reporting to enhance corporate financial resilience.