The effect of sustainability reporting on the bankruptcy risk of energy companies in Asia

• Main Authors: Angping, Erica, Evangelista, Francheska Marie, Ko, Maria Patricia Ann
• Format: text
• Language: English
• Published: Animo Repository 2023
• Subjects: Sustainability development reporting; Bankruptcy; Accounting; Business
• Online Access: https://animorepository.dlsu.edu.ph/etdb_acc/97; https://animorepository.dlsu.edu.ph/context/etdb_acc/article/1141/viewcontent/The_effect_of_sustainability_reporting_on_the_bankruptcy_risk_of.pdf
• Institution: De La Salle University

In recent years, there has been an increased demand for sustainability globally. The demand for sustainability has elicited a demand for environmental, social, and governance (ESG) disclosure. This is particularly essential for sectors that play a critical role in influencing the environmental, social, and governance conditions of firms in the global setting, such as the energy sector. There is an observable growth in the energy sector in Asia, yet while the sector continues to grow, it is still vulnerable to bankruptcy. Firms engaged in the energy sector are at risk of bankruptcy due to their capital-intensive nature and unstable product prices. The study aims to determine the impact of sustainability reporting on the bankruptcy risks of energy firms in Asia. Sustainability reporting was measured through individual and overall environmental, social, and governance scores, while bankruptcy risks were measured through the Altman Z-Score, debt ratio, and debt-to-equity ratio. Moreover, the outcome is controlled by the firm size and inflation rate. An unbalanced data panel analysis was utilized to evaluate the impact of the variables. The analysis revealed that the overall ESG has an effect on the Altman Z-score and debt ratio. The same result is also observed in the individual environmental and social performance. On the contrary, individual governance performance has no significant effect on the bankruptcy risks of the firms involved in the energy sector. Likewise, sustainability reporting is deemed to have no significant effect on the debt-to-equity ratio. The discovered relationship exhibits the significance of sustainability reporting in relation to bankruptcy risks of firms in the energy sector. The paper aims to contribute to the various demands of publicly listed firms, investors, regulators, and future researchers.