Does it pay to be an honest entrepreneur? Addressing the relationship between sustainable development and bankruptcy risk

Simone Pizzi, Fabio Caputo and Andrea Venturelli

Corporate Social Responsibility and Environmental Management, 2020, vol. 27, issue 3, 1478-1486

Abstract: Firms' financial stability represents one of the most important aspects for entrepreneurs. In recent years, the European Commission have started to provide new recommendations for the Member States in order to sustain the “honest entrepreneurs” in their activities through new specific regulations on firms' insolvency. Furthermore, the Member States have favored these processes through the introduction in their legal systems of new tools to sustain the voluntary adoption of more ethical business models. A typical example is represented by the Italian context where the regulator introduced a legality rating (LR) to reward entrepreneurs that voluntarily act ethically. In order to evaluate the effects connected to the LR voluntary adoption, we have analysed the relationship between its adoption and firms' Z‐Score through a panel data analysis on 296 firms during the period between 2012 and 2017. Our findings suggest that LR adopters have been characterized by a lower degree of bankruptcy risk.

Date: 2020
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https://doi.org/10.1002/csr.1901

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Persistent link: https://EconPapers.repec.org/RePEc:wly:corsem:v:27:y:2020:i:3:p:1478-1486

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