Environmental, social, and governance perfomance and default risk in the eurozone.

This paper analyses the impact of sustainability through ESG factors on the default risk. The sample consists of 990 non-financial firms in the Eurozone over the period 2004–2020. The results show that ESG factors influence default risk, although this relationship could be influenced by the economic cycle. Also, the results highlight a significant interaction effect between firm size and ESG which affects default risk. Considering firm size by terciles, the evidence obtained shows that smaller and medium-sized firms have a positive net effect of a high ESG score on their default risk, while the opposite effect was found among larger firms. [ABSTRACT FROM AUTHOR]