Corporate environmental information disclosure, managerial ownership and the cost of debt

Abstract

There is still a dearth of literature on the subject of environmental information disclosure in debt finance with centralized managerial ownership. This study uses environmental information disclosure as a mediating variable to empirical study the impact of managerial ownership on corporate debt financing. Managers may inhibit environmental information disclosure for their own interests, resulting in information asymmetry and ‘over investment’ behaviors. Creditors face additional risks and require higher risk compensation, which increases the cost of debt. Based on a sample of listed heavy pollution firms in China between 2016 and 2020, the research results explore that managerial ownership increases debt cost through a company's environmental information disclosure. This study adds to the literature by demonstrating that managerial ownership both increases the debt cost and prevents environmental information disclosure, despite the literature's indication that managerial ownership will cause changes in the debt cost.