Is mandatory sustainability disclosure associated with default risk? Evidence from emerging markets

Trung Do and Xuan Vinh Vo

Finance Research Letters, 2023, vol. 55, issue PA

Abstract: We examine the impact of mandatory environmental, social, and governance (ESG) disclosure on firms’ default risk. Using a comprehensive sample of 17 emerging countries, we empirically show that firms subject to the mandatory ESG regulation have decreased default risk subsequent to the mandate. This result is consistent with the argument that implementation of mandatory ESG disclosure improves corporate transparency and serves as a substitute for corporate governance mechanisms. Overall, our study supports the positive view of mandatory ESG disclosure and thus contributes to a timely debate on the pros and cons of the mandate in the economy and wider society.

Keywords: Mandatory ESG disclosure; Default risk; Monitoring; Emerging markets (search for similar items in EconPapers)
JEL-codes: G30 G33 M14 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:55:y:2023:i:pa:s1544612323001915

DOI: 10.1016/j.frl.2023.103818

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