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ESG and the monitoring role of ESG-assurance in credit risks: evidence from Europe

Zelalem Abay & Stefan Sjögren

International Journal of Banking, Accounting and Finance2025https://doi.org/10.1504/ijbaaf.2025.151880article
AJG 2ABDC C
Weight
0.50

What the paper says

This study examines how third-party environmental, social, and governance (ESG) assurance and ESG performance influence credit risk. Using a European dataset of 1,448 firm-year observations, we find that third-party ESG assurance improves credit ratings indirectly by enhancing ESG performance, consistent with monitoring theory. In line with the risk mitigation view of ESG investment, we further document that superior ESG performance is associated with a lower credit risk. These findings have important implications for the ongoing debate on ESG and its independent assurance across academic, policy, and industry domains. The pronounced role of ESG performance in reducing credit risk is relevant not only for firms but also for credit rating agencies, who can incorporate ESG-related factors to capture a broader spectrum of risks and opportunities. Moreover, policymakers may leverage the monitoring function of third-party ESG assurance to strengthen self-disciplinary mechanisms within the corporate sector.

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https://doi.org/https://doi.org/10.1504/ijbaaf.2025.151880

Or copy a formatted citation

@article{zelalem2025,
  title        = {{ESG and the monitoring role of ESG-assurance in credit risks: evidence from Europe}},
  author       = {Zelalem Abay & Stefan Sjögren},
  journal      = {International Journal of Banking, Accounting and Finance},
  year         = {2025},
  doi          = {https://doi.org/https://doi.org/10.1504/ijbaaf.2025.151880},
}

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Evidence weight

0.50

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.50 × 0.4 = 0.20
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.