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Do ESG Risk Scores Influence Financial Distress? Evidence from a Dynamic NDEA Approach

Sustainability, 2023-05, Vol.15 (9), p.7560 [Peer Reviewed Journal]

COPYRIGHT 2023 MDPI AG ;2023 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (https://creativecommons.org/licenses/by/4.0/). Notwithstanding the ProQuest Terms and Conditions, you may use this content in accordance with the terms of the License. ;ISSN: 2071-1050 ;EISSN: 2071-1050 ;DOI: 10.3390/su15097560

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  • Title:
    Do ESG Risk Scores Influence Financial Distress? Evidence from a Dynamic NDEA Approach
  • Author: Antunes, Jorge ; Wanke, Peter ; Fonseca, Thiago ; Tan, Yong
  • Subjects: Accounting ; Balance sheets ; Bankruptcy ; Capital structure ; Coronaviruses ; COVID-19 ; Data envelopment analysis ; Decision making ; Disclosure ; Efficiency ; Expenditures ; Financial leverage ; Indicators ; Market shares ; Pandemics ; Risk ; Social factors ; Social responsibility ; Sovereign debt ; Stochasticity ; Stockholders
  • Is Part Of: Sustainability, 2023-05, Vol.15 (9), p.7560
  • Description: Financial distress is a research topic in finance that has attracted attention from academia following past financial crises. Although previous studies associate financial distress with several elements, the relationship between distress and ESG has not been broadly explored. This paper investigates these issues by elaborating a Dynamic Network DEA model to address the underlying connections between accounting and financial indicators. Thus, a model that includes profit and loss, balance sheet, and capital and operating expenditures indicators is demonstrated under the dynamic network structure to compute financial-distress efficiency scores. Then, the impact of carryovers is considered for the accurate calculation of efficiency scores for the three substructures. The influence of contextual variables, such as socioeconomic and macroeconomic variables, and whether the firm owns an ESG Risk Score or not, is assessed through a stochastic non-linear model that combines three distinct regression types: Simplex, Tobit, and Beta. The results indicate that firms that hold an ESG Risk Score are less prone to be in financial distress, and Governance Score is negatively associated with financial distress efficiency.
  • Publisher: Basel: MDPI AG
  • Language: English
  • Identifier: ISSN: 2071-1050
    EISSN: 2071-1050
    DOI: 10.3390/su15097560
  • Source: GFMER Free Medical Journals
    Coronavirus Research Database
    ROAD: Directory of Open Access Scholarly Resources
    ProQuest Central
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