The effect of ESG performance on credit risk among the top 100 publicly listed companies in asia

Sim, Jun De (2025) The effect of ESG performance on credit risk among the top 100 publicly listed companies in asia. Final Year Project, UTAR.

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Abstract

This thesis explores how Environmental, Social, and Governance (ESG) performance influences the financial stability and credit risk of the top 100 publicly listed companies in Asia between 2017 and 2024. As sustainability has become a central concern for businesses and investors, understanding whether ESG practices strengthen financial resilience has grown increasingly important, particularly when comparing developed and developing countries and considering the disruption caused by the COVID-19 pandemic. The study draws on data from LSEG/Refinitiv and focuses on three key measures of credit risk: the Altman Z-score as an indicator of financial stability, the Interest Coverage Ratio (ICR) as a measure of debt-servicing capacity, and Credit Ratings (converted into a numerical scale) as a proxy for creditworthiness. Panel multiple linear regression models are employed, with both fixed and random effects specifications considered. The Hausman test is used to determine the appropriate estimator. Firm size and the SDG index are included as control variables, while country and pandemic dummies, together with interaction terms, capture variations across contexts and time periods. The findings provide evidence that ESG performance can play a meaningful role in reducing credit risk and improving financial resilience. By highlighting differences between countries and before and after the pandemic, this research adds to the growing body of ESG literature and offers practical insights for investors, managers, and policymakers aiming to balance sustainability with financial performance.

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