ESG Performance And Corporate Default Risk

In recent years,the number and amount of bond defaults in China’s bond market have increased year by year,and the market default risk continues to be exposed.As an emerging non-financial company evaluation method,ESG is an important manifestation of a company’s sustainable development ability,which has received widespread attention from countries around the world.China has also issued a series of policies to support the construction of the ESG system.ESG information covers multiple aspects of corporate governance,environment,and social responsibility.Compulsory disclosure can reduce information asymmetry,improve the transparency of company operations,and help creditors determine their potential risks.At the same time,by actively improving ESG performance,a company can establish a good reputation,improve its operational efficiency and profitability,establish close relationships with stakeholders,obtain the strategic resources required by the company,form a strong competitive advantage,and reduce the risk of default.Based on the above background,this paper studies the relationship between ESG performance and corporate default risk,providing reference for creditors’ rational decision-making and corporate ESG transformation.Based on theories such as sustainable development theory,signaling theory,principal-agent theory,reputation theory,and other theories,this article uses A-share listed companies in China from 2010 to 2021 as a research sample,using a combination of theoretical analysis and empirical research to study the impact of ESG performance on default risk,and further explore its mechanism and heterogeneity.The research results show that:(1)There is a negative correlation between company ESG performance and default risk,that is,companies with better ESG performance have lower default risk.(2)The high degree of marketization of the company’s location can strengthen the inhibitory effect of ESG performance on the company’s default risk.(3)High media attention will strengthen the inhibitory effect of ESG performance on the company’s default risk.(4)In polluting industry enterprises,non-state owned enterprises,and enterprises with low audit quality,ESG performance has a more significant role in reducing default risk.Based on the above conclusions,this article proposes several policy recommendations from the perspectives of companies,creditors,government,and the media.The research conclusions of this article provide a new perspective for creditors to judge the risk of corporate default,and also have important significance for the green transformation of economic society.