Journal Issues

Abstract- This study examines the impact of corporate environmental sustainability policies on default risk, with attention to how different ESG (Environmental, Social, and Governance) indicators affect Taiwanese state-owned enterprises (SOEs) in both manufacturing and non-manufacturing sectors. As ESG investing gains global prominence and stakeholders increasingly emphasize sustainability alongside financial performance, this research applies the Altman Z-score model to evaluate whether improvements in overall ESG scores influence SOEs’ default risk and which ESG dimensions (E, S, G) show varying effects across industries. The results indicate that increasing the total ESG score (TESG_score) significantly reduces default risk in non-manufacturing SOEs but has an adverse effect in manufacturing SOEs, likely due to the higher costs associated with sustainability measures. Improvements in environmental (E) scores show a slight negative impact on default risk in both sectors, as environmental initiatives generally require substantial investment with limited short-term returns. Social (S) and governance (G) enhancements have less influence on default risk, possibly because of government oversight and regulatory constraints specific to SOEs. Overall, the study highlights the challenges faced by SOEs, especially those in manufacturing, in balancing ESG improvements with financial stability, and provides insights for policymakers and managers working to strengthen sustainability while managing default risk.

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