Unraveling the 'green-default paradox': assessing the influence of gender-diverse boards and socially responsible ratings

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Trinh, VQ, Nguyen, N, Le, P and Nguyen, TN ORCID: https://orcid.org/0000-0002-2258-900X, 2025. Unraveling the 'green-default paradox': assessing the influence of gender-diverse boards and socially responsible ratings. International Review of Financial Analysis: 104011. ISSN 1057-5219

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Official URL: https://doi.org/10.1016/j.irfa.2025.104011

Abstract

We investigate the 'green-default paradox' and its connection to gender-diverse boards and socially responsible ratings in influencing the relationship between corporate climate change exposure and distance-to-default. Our analysis uses data from 2004 to 2021 across 42 countries, yielding several significant findings. First, our research challenges the 'green-default paradox' by demonstrating that companies with higher climate exposure exhibit a greater distance to default, indicating reduced default risk. Second, our findings suggest that the effectiveness of internal governance factors and external ESG assessments plays a crucial role in moderating this relationship. Specifically, our primary results are more pronounced in firms with greater gender diversity on their boards and higher ESG ratings. Gender-diverse boards signify a company's increased commitment to addressing climate issues, reduced information asymmetry, and improved internal oversight. ESG ratings, serving as an external assessment, reflect a company's exposure to social capital, trust, and a culture focused on stakeholders, all of which suggest enhanced climate risk management. Third, our study reveals a non-linear relationship between climate exposure and distance to default, indicating diminishing benefits beyond a certain exposure threshold.

Item Type:	Journal article
Publication Title:	International Review of Financial Analysis
Creators:	Trinh, V.Q., Nguyen, N., Le, P. and Nguyen, T.N.
Publisher:	Elsevier
Date:	20 February 2025
ISSN:	1057-5219
Identifiers:	Number Type 10.1016/j.irfa.2025.104011 DOI S1057521925000985 Publisher Item Identifier 2378964 Other
Rights:	This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/).
Divisions:	Schools > Nottingham Business School
Record created by:	Jonathan Gallacher
Date Added:	24 Feb 2025 09:55
Last Modified:	24 Feb 2025 09:55
URI:	https://irep.ntu.ac.uk/id/eprint/53114