ESG controversies and insolvency risk: evidence from the insurance industry

IF 4.1 3区管理学 Q2 BUSINESS

Management Decision Pub Date : 2024-07-09 DOI:10.1108/md-10-2023-2002

Pilar Giráldez-Puig, Ignacio Moreno, Leticia Perez-Calero, Jaime Guerrero Villegas

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Abstract

Purpose

This study investigates the relationships between environmental, social, and governance (ESG) controversies and insolvency risk in the insurance sector. Drawing from legitimacy and stakeholder theories, the authors explore the impact of ESG controversies on insurers’ insolvency risk and the moderating effect of ESG practices on this relationship.

Design/methodology/approach

This study utilises a dataset comprising 120 stock insurance firms spanning from 2011 to 2022. The authors employed system-GMM estimations to control for potential endogeneity and conducted several robustness checks.

Findings

ESG controversy positively influences insurers’ insolvency risk, with ESG practices mitigating these positive effects. The Governance (G) component of ESG practices plays a key role in counteracting the effects of ESG controversies on insurance companies’ insolvency risk.

Originality/value

This is the first study to investigate the direct relationship between ESG controversies and insolvency risk in the insurance industry. It underscores the critical influence of stakeholders’ perceptions of the company’s legitimacy, which is determined by the number of ESG controversies undertaken by the insurer company, on its insolvency risk. Additionally, by examining the three components of ESG practices individually, the authors offer insights into how managers can gain a competitive edge, particularly by utilising governance practices as safeguards against the adverse effects of ESG controversies on their financial risk.

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环境、社会和治理争议与破产风险：来自保险业的证据

目的本研究探讨了环境、社会和治理（ESG）争议与保险业破产风险之间的关系。作者从合法性和利益相关者理论出发，探讨了环境、社会和治理争议对保险公司破产风险的影响，以及环境、社会和治理实践对这一关系的调节作用。作者采用系统-GMM 估计来控制潜在的内生性，并进行了若干稳健性检查。研究结果ESG 争议对保险公司的破产风险有积极影响，而 ESG 实践则减轻了这些积极影响。ESG 实践中的治理（G）部分在抵消 ESG 争议对保险公司破产风险的影响方面发挥了关键作用。它强调了利益相关者对公司合法性的看法对公司破产风险的关键影响，而利益相关者对公司合法性的看法是由保险公司在环境、社会和治理方面的争议数量决定的。此外，通过逐一研究环境、社会和公司治理实践的三个组成部分，作者深入探讨了管理者如何获得竞争优势，尤其是如何利用治理实践来防范环境、社会和公司治理争议对其财务风险的不利影响。

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来源期刊

Management Decision Multiple-

CiteScore

8.20

自引率

8.70%

发文量

126

期刊介绍： ■In-depth studies of major issues ■Operations management ■Financial management ■Motivation ■Entrepreneurship ■Problem solving and proactivity ■Serious management argument ■Strategy and policy issues ■Tactics for turning around company crises Management Decision, considered by many to be the best publication in its field, consistently offers thoughtful and provocative insights into current management practice. As such, its high calibre contributions from leading management philosophers and practitioners make it an invaluable resource in the aggressive and demanding trading climate of the Twenty-First Century.

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