Author(s)

Muzi Feng ¹

Affiliation(s)

¹ The University of Waikato, Hamilton, New Zealand

Corresponding Author

Muzi Feng

ABSTRACT

With transformation in green technology and increasing attention from governments and authority, ESG score and its impact on credit risk have gradually become a significant subject after the financial crisis. By analyzing the data of 42 commercial banks in China from 2012 to 2020, we found that a better performance in ESG score can improve the reduction of credit risk exposures. Through mediating effect analysis, we found investor sentiment index is the mediator and it has a marginal increasing effect on decreasing credit risk. Relevant studies indicate that there is regional heterogeneity and government support heterogeneity in the impact of ESG score and default distance. The theoretical and practical orientation of our paper is to mitigate the negative consequences and strengthen the control of credit risk under the internal and external supervision of banks.

KEYWORDS

ESG Score; Default Distance; Structural Equation Model; Catering Theory

CITE THIS PAPER

Muzi Feng, Research on ESG score impacted on credit risk of commercial banks. Financial Engineering and Risk Management (2024) Vol. 7: 189-197. DOI: http://dx.doi.org/10.23977/ferm.2024.070425.

REFERENCES

[1] Xiong, B., Yifan, Z., & Jinmian, H. (2022). ESG performance, institutional investor performances and firm value. Journal of Statistics and Information, 37(10), 117-128.
[2] Yili, D. (2022). A study on the relationship between ESG rating and investment return based on complex emotion measurement, Environmental Science Pollution Research, 9(3), 61-73.
[3] Ying, Z. (2023). Study on the influence mechanism of ESG performance on green technology innovation of distribution enterprises. Commercial economic research, 23, 164-167.
[4] Zarafat, H., Liebhardt, S., & Eratalay, MH. (2022). Do ESG Ratings Reduce the Asymmetry Behavior in Volatility? Journal of Risk and Financial Management, 15(8), 1-32.
[5] Zhang, J., Yang, G., Ding, X., & Qin, J. (2022). Can green bonds empower green technology innovation of enterprises? Environmental Science Pollution Research, 11(3), 87-101.
[6] Zhaohui, L., Mingjie, Z., Fan, Z., & Yan, L. (2023). Research on Credit risk of commercial banks based on modified KMV model. Financial development research, 7, 89-92.

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