Public Policy Implications of ESG Performance on Corporate Credit Risk: Insights from the Merton Distance-to-Default Model

Against the backdrop of China's slowing economy, this paper studies the relationship between ESG performance of China's listed companies and default distance. This study employs panel data and multiple linear regression methods. The results indicate a positive relationship between aggregate ESG performance and corporate default distance. While environmental indicators do not have a significant correlation, social and corporate governance indicators show a positive correlation. In conclusion, enterprises with better ESG performance have a greater default distance. These findings contribute to the exploration of the relationship between ESG performance and the default distance of Chinese listed firms.