Econometric analysis of cement companies in an emerging market: A sustainability outlook

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Abstract

Cement plays a crucial role in India’s infrastructure projects and contributes significantly to the nation’s gross domestic product (GDP) and employment. India’s urbanization relies heavily on this sector as the world’s second-largest producer of cement. Given its economic importance, understanding and assessing financial health and predicting the likelihood of default by these companies are critical for stakeholders. This study investigates various financial ratios, assesses their significance, and explores their relationship with the Altman Z score, a financial ratio used to predict the probability of a company’s bankruptcy. Recent corporate practices show a growing trend toward incorporating corporate social responsibility (CSR) reporting and sustainable growth rate (SGR) reporting into mandatory disclosures. These metrics are strategically used to improve public perception, build stakeholder trust, and convey a company’s reliability and operational performance. This study further explores the potential impact of CSR and SGR on bankruptcy risk, assessed using the Altman Z-score. Empirical analysis within the Indian cement industry reveals that, at present, CSR and SGR factors may not have a significant effect on financial distress. This study contributes significantly to the understanding of the financial health of the Indian cement industry while examining the evolving roles of CSR and SGR. It provides a nuanced perspective by empowering stakeholders to identify financial and non-financial indicators of stability. It also emphasizes the critical need for holistic assessment methodologies in the ever-evolving corporate landscape.

Keywords: Financial Health, Financial Ratios, Altman Z-Score, Corporate Social Responsibility, CSR Reporting, Sustainable Growth Rate, SGR, Cement Industry India

Authors’ individual contribution: Conceptualization — M.P.D.; Methodology — M.P.D., M.J., and R.S.; Formal Analysis — M.P.D., M.J., and R.S.; Investigation — M.P.D., M.J., and R.S.; Software — M.J.; Validation — M.P.D., M.J., and R.S.; Writing — Original Draft — M.P.D., M.J., and R.S.; Writing — Review & Editing — M.P.D., M.J., and R.S.; Visualization — M.J.; Supervision — R.S.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G30, G33, G110, G170, M140

Received: 01.08.2024
Accepted: 09.01.2025
Published online: 14.01.2025

How to cite this paper: Dhuri, M. P., Joshi, M., & Sinha, R. (2024). Econometric analysis of cement companies in an emerging market: A sustainability outlook. Corporate Governance and Sustainability Review, 8(4), 30–43. https://doi.org/10.22495/cgsrv8i4p3