Chih-Hsing Hung¹, Chien-Ho Lin^2,, Ching-Hong Wang³, Chin-Ming Chen⁴

This study examines the association between environmental, social, and governance (ESG) performance and a default-risk proxy for Taiwanese state-owned enterprises (SOEs). Using Bloomberg financial data, Taiwan Economic Journal (TEJ) ESG ratings, and 147 firm-year observations from 2015 to 2021, we estimate ordinary least squares models separately for manufacturing and non-manufacturing SOEs. Higher total ESG scores (TESG) are positively associated with Altman Z-scores in both sectors in the controlled specifications, implying lower default risk, although the manufacturing coefficient changes sign across model specifications. At the dimensional level, higher environmental (E) scores are associated with lower Z-scores in manufacturing SOEs, whereas the corresponding association for non-manufacturing SOEs becomes statistically insignificant after additional covariates are included. The pooled full-sample analysis likewise yields an insignificant E-score coefficient in the controlled model. Social (S) and governance (G) scores are generally insignificant. Overall, the evidence indicates that the ESG-default-risk relationship is sector- and specification-dependent, and that the negative environmental association is concentrated in manufacturing SOEs. The findings inform the design of sector-sensitive sustainability policies while underscoring the need for cautious causal interpretation.

ESG, default risk, TESG score, state-owned enterprises, Altman Z-score