Eco- and Socio-Efficiency as Determinants of Default Risk: Evidence from European Firms
Abstract
This study investigates how eco-efficiency and socio-efficiency influence firms’ default risk across the European financial, industrial, and consumer service sectors from 2010 to 2024. This study aims to determine whether integrating environmental and social performance into corporate strategies mitigates financial distress over time. The Pooled Mean Group ARDL estimator was employed to capture the short- and long-term dynamics. The results indicate that higher eco- and socio-efficiency significantly reduce long-term default risk, particularly in the financial and industrial sectors. Short-term effects were found to be insignificant, suggesting that sustainability benefits gradually emerged. This study offers novel sector-specific evidence linking sustainability efficiency to default risk in European firms and provides insights into how environmental and social efficiencies enhance corporate resilience and financial stability.
Fields of Study & Subjects
Corporate Finance and Governance
Financial Reporting and Valuation Research
Firm Innovation and Growth
Publication details
- Journal / source
- Journal of risk and financial management
- Publisher
- MDPI AG
- Volume
- 19
- Issue
- 6
- Pages
- 445–445
- Publication date
- 19 June 2026
- Language
- EN