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Carbon risk, cost of debt financing and the moderation effect of media attention: Evidence from Chinese companies operating in high-carbon industries
journal contributionposted on 17.06.2019, 09:01 by Zhifang Zhou, Tao ZhangTao Zhang, Kang Wen, Huixiang Zeng, Xiaohong Chen
The effect of carbon risk on the debt capital market has become increasingly prominent under carbon constraints. We use a panel regression model to examine the relationship between carbon risk and the cost of debt financing and the moderating effect of positive media attention on this relationship. Using a sample of 191 Chinese A‐share listed firms operating in high‐carbon industries covering the period 2011–15, we conduct an empirical study and find that the relationship between carbon risk and the cost of debt financing in China is a U‐shaped one. Thus, carbon risk exerts an “interval effect" on the cost of debt financing, which mainly exists in private firms rather than state‐owned firms. This relationship can be mitigated by positive media attention. Compared with private firms that receive low positive media attention, private firms with high positive media attention are more sensitive and less tolerant to environmental regulations. Our findings provide firms with practical advice on carbon risk management, particularly on improving carbon transparency and mitigating the cost of debt financing.
National Natural Science Funds of China, Grant/Award Number: No.71303263 71303263; State Key Program of National Natural Science of China, Grant/Award Number: No. 71431006 71431006; Project of Social Science Achievement Evaluation Committee of Hunan Province; Research and Innovation Project for Postgraduates in Hunan Province of China, Grant/Award Number: CX2016B036; Base Project of Social Science Fund of Hunan Province, Grant/Award Number: 16JD67; Key Projects of Philosophy and Social Sciences of the Ministry of Education, Grant/Award Number: 16JZD013; Natural Science Funds of Hunan Province, Grant/Award Number: 2017JJ3399.
- Loughborough University London