Impact of ESG Performance on Firms Default Risk

Sharmila Nasrin () and R. Sreejith
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Sharmila Nasrin: Rajagiri Business School
R. Sreejith: Rajagiri College of Social Science

A chapter in Contemporary Economic Issues in Asian Countries: Proceeding of CEIAC 2022, Volume 2, 2023, pp 39-48 from Springer

Abstract: Abstract This study investigates the impact of Environmental, Social, and Governance (ESG) performance on firms’ default risk. Our findings were based on a sample of 2302 Indian companies from the year 2014–21. A direct relationship was found wherein the firms with higher ESG performances had higher chances of default. Two reasons could explain the anomaly reported for the Indian market. Firms might try to inflate ESG performance through greenwashing. Second, the ESG performances computed by Refinitiv might require calibration to be appropriate for emerging markets like India. In either scenario, ESG performances as they are calculated now are not a true representation of firm sustainability.

Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-981-99-0490-7_4

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DOI: 10.1007/978-981-99-0490-7_4

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