The relationship between mandatory disclosure of sustainable practices and the risk of corporate bankruptcy
DOI:
https://doi.org/10.11606/issn.1982-6486.rco.2026.238337Keywords:
Sustainable practices, Mandatory ESG disclosure, Bankruptcy risk, Emerging countries, Difference-in-differencesAbstract
The increasing importance of sustainable practices has prompted regulations for mandatory disclosure. This highlights the potential impact of these practices on corporate performance and solvency. However, the literature points to different perceptions. Some authors understand that this disclosure is merely a façade. Others find that mandatory disclosure of sustainable practices effectively mitigates corporate risks. These effects particularly benefit companies operating in emerging countries requiring consistent control and institutional mechanisms. Therefore, this study aims to examine the impact of mandatory disclosure of ESG practices on the risk of corporate bankruptcy. A sample of 6,126 publicly traded non-financial companies in 11 emerging countries is analyzed, with data obtained from 2014 to 2023. The main hypothesis is verified using a difference-in-differences regression model. The results of the main and robustness tests indicate that mandatory disclosure of sustainable practices increases the risk of corporate bankruptcy. This conclusion confirms the shareholder theory, which states that economic sustainability overrides ESG dimensions.
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