ESG Rating and Corporate Debt Default Risk

This paper analyzes the relationship between ESG rating and corporate debt default risk by taking A-share listed companies in Shanghai and Shenzhen from 2011 to 2021 as samples. The research finds that ESG rating is significantly negatively correlated with corporate debt default risk, and a good ESG rating reduces corporate debt default risk by reducing debt financing costs and easing financing constraints. Taking HKEX's major revision of the Environmental, Social and Governance Reporting Guidelines in 2015 as an exogenous impact, the DID model is constructed, and it is found that the revision of ESG information disclosure guidelines can effectively reduce the debt default risk of HKEX listed companies, and the conclusion is still robust. In the further study, it is found that the impact of ESG rating on corporate debt default risk mainly exists in non-state-owned enterprises, dual roles, high analyst attention, low external financing demand and non-heavy polluting enterprises.

Keywords: ESG Rating, Debt Default Risk, Debt Financing Cost, Financing constraints

Suggested Citation: Suggested Citation

Xu, Xiaofang and JI, Yi and WANG, Danni and SHI, Guoying, ESG Rating and Corporate Debt Default Risk. Available at SSRN: https://ssrn.com/abstract=4949032 or http://dx.doi.org/10.2139/ssrn.4949032