Corporate Social Responsibility and Environmental Management· 2026Q1
ESG Performance and Corporate Bankruptcy Risk: A Pan‐European Analysis
- 0citations
- Q1SCImago
- 2026year
Short summary
Higher ESG scores are linked to lower bankruptcy risk (Z-score) in European firms, with governance being the strongest driver.
AI-generated from the title and abstract; the full text is not read.
Key points
- Higher ESG scores correlate with lower bankruptcy risk across 17 European countries.
- Corporate governance is the primary ESG component reducing bankruptcy risk.
- ESG performance improves bankruptcy risk partly via enhanced operating performance (ROA).
- The stabilizing effect of ESG is more pronounced in larger firms.
AI-generated from the title and abstract; the full text is not read.
Abstract
ABSTRACT This study analyzes how Environmental, Social, and Governance (ESG) performance affects bankruptcy risk, using data from publicly listed firms across 17 European countries over a 21‐year period. We find that higher ESG scores are significantly associated with lower bankruptcy risk, as proxied by Z ‐score. In addition, we disaggregate ESG into its Environmental, Social, and Governance components, and find that the latter emerges as the strongest determinant of low bankruptcy risk, while social and environmental factors show weaker and more context‐dependent effects. Our empirical analysis also explores a potential channel through which ESG performance affects bankruptcy risk, and our findings indicate that ESG performance contributes to lower bankruptcy risk partly through improved operating performance (as proxied by ROA) and that its stabilizing effect is particularly stronger among larger firms. The findings highlight the critical role of ESG practices, particularly governance, in enhancing firm resilience and support the integration of ESG considerations into credit risk assessments.
The authors' abstract, as published at the source. Corporate Social Responsibility and Environmental Management, 2026 · DOI ↗
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