The effect of environmental information disclosure and energy product type on the cost of debt: Evidence from energy firms in China

Mohan Fonseka; Theja Rajapakse; Grant Richardson

doi:10.1016/j.pacfin.2018.05.001

The effect of environmental information disclosure and energy product type on the cost of debt: Evidence from energy firms in China

Mohan Fonseka, Theja Rajapakse, Grant Richardson^*

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

98 Citations (Scopus)

Abstract

This study examines the effect of environmental information disclosure (EID) and energy product type on Chinese energy firms' cost of debt (COD). Using a sample of Chinese energy firms over 2008–2014, we find a significant negative association between EID and the COD. We also observe a significant negative association between several energy product types (hydro power, oil, solar and wind) and energy firms' COD. Finally, we analyze the joint effect of EID and energy product type on energy firms' COD and find that when gas, thermal power generation, and hydro firms increase their level of EID their COD increases, but when solar and wind power firms increase their level of EID, this decreases their COD. Our findings are robust to several endogeneity checks.

Original language	English
Pages (from-to)	159-182
Number of pages	24
Journal	Pacific-Basin Finance Journal
Volume	54
Early online date	9 May 2018
DOIs	https://doi.org/10.1016/j.pacfin.2018.05.001
Publication status	Published - Apr 2019
Externally published	Yes

Keywords

China
Cost of debt
Energy firms
Energy product type
Environmental information disclosure

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10.1016/j.pacfin.2018.05.001

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title = "The effect of environmental information disclosure and energy product type on the cost of debt: Evidence from energy firms in China",

abstract = "This study examines the effect of environmental information disclosure (EID) and energy product type on Chinese energy firms' cost of debt (COD). Using a sample of Chinese energy firms over 2008–2014, we find a significant negative association between EID and the COD. We also observe a significant negative association between several energy product types (hydro power, oil, solar and wind) and energy firms' COD. Finally, we analyze the joint effect of EID and energy product type on energy firms' COD and find that when gas, thermal power generation, and hydro firms increase their level of EID their COD increases, but when solar and wind power firms increase their level of EID, this decreases their COD. Our findings are robust to several endogeneity checks.",

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T2 - Evidence from energy firms in China

AU - Fonseka, Mohan

AU - Rajapakse, Theja

AU - Richardson, Grant

PY - 2019/4

Y1 - 2019/4

N2 - This study examines the effect of environmental information disclosure (EID) and energy product type on Chinese energy firms' cost of debt (COD). Using a sample of Chinese energy firms over 2008–2014, we find a significant negative association between EID and the COD. We also observe a significant negative association between several energy product types (hydro power, oil, solar and wind) and energy firms' COD. Finally, we analyze the joint effect of EID and energy product type on energy firms' COD and find that when gas, thermal power generation, and hydro firms increase their level of EID their COD increases, but when solar and wind power firms increase their level of EID, this decreases their COD. Our findings are robust to several endogeneity checks.

AB - This study examines the effect of environmental information disclosure (EID) and energy product type on Chinese energy firms' cost of debt (COD). Using a sample of Chinese energy firms over 2008–2014, we find a significant negative association between EID and the COD. We also observe a significant negative association between several energy product types (hydro power, oil, solar and wind) and energy firms' COD. Finally, we analyze the joint effect of EID and energy product type on energy firms' COD and find that when gas, thermal power generation, and hydro firms increase their level of EID their COD increases, but when solar and wind power firms increase their level of EID, this decreases their COD. Our findings are robust to several endogeneity checks.

KW - China

KW - Cost of debt

KW - Energy firms

KW - Energy product type

KW - Environmental information disclosure

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JO - Pacific-Basin Finance Journal

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The effect of environmental information disclosure and energy product type on the cost of debt: Evidence from energy firms in China

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Keywords

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