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Can ESG Performance Affect Bond Default Rate? Evidence from China

Author

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  • Peixin Li

    (School of Finance and Banking, University of International Business and Economics, Beijing 100029, China)

  • Rongxi Zhou

    (School of Finance and Banking, University of International Business and Economics, Beijing 100029, China)

  • Yahui Xiong

    (School of Finance and Banking, University of International Business and Economics, Beijing 100029, China)

Abstract

Capturing determinants of bond default risks has aroused heated discussions ever since the “rigid payment” system collapsed in China. Within this context; this paper aims to clarify the relation between an issuer’s environmental; social; and corporate (ESG) performance and its bond default rate. We developed an ESG factors-embedded Logistic Regression model to empirically examine Chinese default bonds and outstanding industrial bonds from 2014 to 2019. Results indicate that the bond default rate is positively correlated with the company’s energy consumption and negatively correlated with its attention to social responsibilities; and corporate governance; in addition to its financial performances. In conclusion; to fully take ESG factors into consideration during the decision-making process and daily operations might improve stability and credibility of corporations in modern Chinese national context.

Suggested Citation

  • Peixin Li & Rongxi Zhou & Yahui Xiong, 2020. "Can ESG Performance Affect Bond Default Rate? Evidence from China," Sustainability, MDPI, vol. 12(7), pages 1-12, April.
    • Handle: RePEc:gam:jsusta:v:12:y:2020:i:7:p:2954-:d:342617
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    References listed on IDEAS

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    Cited by:

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    2. Meles, Antonio & Salerno, Dario & Sampagnaro, Gabriele & Verdoliva, Vincenzo & Zhang, Jianing, 2023. "The influence of green innovation on default risk: Evidence from Europe," International Review of Economics & Finance, Elsevier, vol. 84(C), pages 692-710.
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    4. Billio, Monica & Costola, Michele & Hristova, Iva & Latino, Carmelo & Pelizzon, Loriana, 2022. "Sustainable finance: A journey toward ESG and climate risk," SAFE Working Paper Series 349, Leibniz Institute for Financial Research SAFE.
    5. Indah Fajarini Sri Wahyuningrum & Amin Chegenizadeh & Natasya Ghinna Humaira & Mochamad Arief Budihardjo & Hamid Nikraz, 2023. "Corporate Governance Research in Asian Countries: A Bibliometric and Content Analysis (2001–2021)," Sustainability, MDPI, vol. 15(8), pages 1-20, April.
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    10. Ge Ge & Xiang Xiao & Zhenzhu Li & Qinghui Dai, 2022. "Does ESG Performance Promote High-Quality Development of Enterprises in China? The Mediating Role of Innovation Input," Sustainability, MDPI, vol. 14(7), pages 1-24, March.

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