Corporate Carbon Information Disclosure and Financing Costs: The Moderating Effect of Sustainable Development

Abstract

With the Global Reporting Initiative (a provider of the global best practice for impact reporting) systematically helping parties to understand and exchange issues such as climate change and formulating authoritative sustainability reporting guidelines, corporate sustainable development is becoming more and more critical for companies. Moreover, corporate carbon information disclosure has the potential to promote corporate financing after the Green Climate Fund has been playing their part in climate finance. Previous studies focused more on the cost of equity. Considering the volatility of the capital market, the cost of equity financing is more unstable and complex. This study limited the financing cost to the cost of debt, took Chinese listed companies from 2009 to 2021 as a research sample, and explored the relationship between corporate carbon information disclosure, sustainable development, and financing costs. This study adopted fixed-effects (within) regression or random-effects GLS regression (defined through the Breusch and Pagan Lagrange multiplier test for random effects and the Hausman test) as estimation methods to control individual effects and endogenous problems brought by time. At the same time, the model was modified when there was heteroscedasticity and autocorrelation accordingly. The results show that the more carbon information disclosure, the lower the financing cost; sustainable development weakens the inhibitory effect of carbon information disclosure on financing costs. This study affirms the financing value of reducing information asymmetry, and found that sustainable development (internal growth capacity) may increase the cost of debt. The stronger the sustainable development is, the more financing needs may be, thus raising the cost of debt. This study not only implies that creditors may attach importance to the value of carbon information disclosure at the time of borrowing, but also provides theoretical evidence for the government or securities regulators to speed up the mandatory carbon information disclosure.