ESG, Financial Leverage and Bankruptcy: The Moderating Role of IBC
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Financial leverage is a double-edged sword: it enables growth but elevates bankruptcy risk. In India, the Insolvency and Bankruptcy Code (IBC) of 2016 revolutionized corporate distress management with time-bound resolutions and stronger creditor protection. At the same time, Environmental, Social, and Governance (ESG) practices have gained prominence as drivers of resilience. This paper develops a conceptual framework linking ESG, leverage, and bankruptcy risk, with IBC as a moderator. We argue that ESG reduces the adverse effects of high leverage and that IBC strengthens this buffer through institutional reforms. The study integrates sustainability and insolvency literature, offering theoretical contributions and directions for empirical research.
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