Social and Governance Factors in Default Risk Assessment

16 July 2026

Banca d'Italia today publishes 'Social and Governance Factors in Default Risk Assessment', the new issue of the series 'Markets, infrastructures, payment systems'.

We investigate whether social (S) and corporate governance (G) indicators help to better assess default risk for Italian non-financial corporations in Banca d'Italia's In-house Credit Assessment System (ICAS). Specifically, S indicators use data from the Italian National Social Security Institute (INPS) database, and G indicators are derived from a structured database of Italian firms and provide information on corporate relationships and governance traits not included in standard financial data. Our results show that S and G indicators improve default prediction. They are statistically significant for micro and small firms, refining the baseline model that includes financial and credit behaviour variables. However, their overall contribution to the model's performance is moderate. For medium-sized and large firms, only S indicators are statistically significant.