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Eco- and Socio-Efficiency as Determinants of Default Risk: Evidence from European Firms

Year: 2026

Type: article

Abstract: This study investigates how eco-efficiency and socio-efficiency influence firms’ default risk across the European financial, industrial, and consumer service sectors from 2010 to 2024. This study aims to determine whether integrating environmental and social performance into corporate strategies mitigates financial distress over time. The Pooled Mean Group ARDL estimator was employed to capture the short- and long-term dynamics. The results indicate that higher eco- and socio-efficiency significantly reduce long-term default risk, particularly in the financial and industrial sectors. Short-term effects were found to be insignificant, suggesting that sustainability benefits gradually emerged. This study offers novel sector-specific evidence linking sustainability efficiency to default risk in European firms and provides insights into how environmental and social efficiencies enhance corporate resilience and financial stability.

Source: Journal of risk and financial management

DOI: 10.3390/jrfm19060445

Authors: Bochra Issa, Sana Ben Abdallah, Foued Badr Gabsi

Institution: University of Sfax

Language: English

Topic: Financial Distress and Bankruptcy Prediction

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

SDGs: Responsible consumption and production, Decent work and economic growth

Open Access status: hybrid

Estimated APC paid: $1,689