Natural resource intensity and corporate financial vulnerability: firm-level evidence from South Asia

Resource-intensive production makes South Asia’s textile sector a catalyst for growth and employment, but dependence on natural inputs may transmit input-cost shocks into corporate financial risk. This paper examines whether firm-level Natural Resource Intensity Ratio (NRIR), measured as natural resource input costs relative to net sales, is associated with corporate financial vulnerability among listed textile firms in South Asia. Corporate financial vulnerability is assessed using two complementary indicators: financial stability, measured by the Altman Z-score, and financial distress, measured by the Ohlson O-score. The 100-firm balanced panel (2015-2024), including Bangladesh, India, and Pakistan, provides an estimation of firm fixed-effects models that control for country and year, and inference is made with a high level of heteroskedasticity and serial correlation. An increase in NRIR correlates with a reduction in the Altman Z-scores and an increase in the Ohlson O-scores. Profitability and liquidity are associated with a partial attenuation of these links, and leverage with their amplification, although the profitability buffer is not uniform across countries and is statistically clearest for the stability outcome. Time-respecting machine-learning validation confirms the predictive importance of NRIR and indicates a steeper, threshold-like association in the upper tail of the resource-intensity distribution. These conclusions are backed up by robustness checks. Natural resource dependence, hence, is a route or channel of financial risk, whereas causal interpretation is constrained by observational design.