IDEAS home Printed from https://ideas.repec.org/a/rsk/journ1/7961388.html
   My bibliography  Save this article

Default risk in the era of environmental, social and governance ratings: a comparative analysis of divergence

Author

Listed:
  • Usman Hameed
  • Jianling Wang
  • Chen Wang
  • Bab Shah
  • Wajid Khan

Abstract

We investigate the effect of environmental, social and governance (ESG) ratings and their divergence on default risk. Using a sample of Chinese A-share listed firms from 2009 to 2022, we find a negative relationship between default risk and ESG performance, suggesting that better ESG performance could lower default risk for firms. Moreover, ESG rating divergence weakens this negative relationship. Several robustness tests, addressing endogeneity concerns and using alternative default risk measures, confirm the validity of this finding. In addition, the marginally inhibiting effect of ESG ratings and rating divergence on default risk is more noticeable in companies that have low market competition, low audit quality and high levels of financial constraints and that belong to industries with high pollution. This paper highlights the importance of including ESG factors in investment strategies as well as the significance of transparency and standardization in

Suggested Citation

  • Usman Hameed & Jianling Wang & Chen Wang & Bab Shah & Wajid Khan, . "Default risk in the era of environmental, social and governance ratings: a comparative analysis of divergence," Journal of Credit Risk, Journal of Credit Risk.
    • Handle: RePEc:rsk:journ1:7961388
    as

    Download full text from publisher

    File URL: https://www.risk.net/node/7961388
    Download Restriction: no
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rsk:journ1:7961388. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Thomas Paine (email available below). General contact details of provider: https://www.risk.net/journal-of-credit-risk .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.