Environmental Performance, Debt Financing Cost and Firm Value: A Case Study of Listed Companies in Heavily Polluting Industries

Jing  Lin

doi:10.14456/jsasr.2023.34

Authors

Jing Lin MBA, Rangsit University, Thailand https://orcid.org/0000-0002-4921-4662

DOI:

https://doi.org/10.14456/jsasr.2023.34

Keywords:

Heavily Polluting Industries; , Environmental Performance; , Debt Financing Cost; , Enterprise Value

Abstract

Background and Aim: As the public becomes more and more sensitive to environmental pollution, they will pay more attention to the environmental protection of enterprises. The high level of environmental performance of enterprises means that enterprises will pay more energy and resources. Simultaneously, stable and sustainable capital supply is an important guarantee for enterprises to obtain sustainable development in market competition; moreover, debt financing cost becomes crucial for enterprises. Lower debt financing cost refers to that enterprises can spend more money for business development and improve the value of enterprises. This research studies the relationship between corporate environmental performance, debt financing cost and corporate value through the data of listed companies in heavily polluting industries from 2011 to 2021.

Materials and Methods: Firstly, the research is designed by using the document research method combined with stakeholder theory, signaling theory, principal-agent theory and other relevant theories; besides, empirical research is conducted through descriptive statistics, correlation analysis and multiple linear regression model.

Results: The environmental performance of listed companies in heavily polluting industries has a significant negative correlation with debt financing costs; environmental performance significantly promotes enterprise value; the cost of debt financing has a significant positive correlation with enterprise value; debt financing cost has intermediary effect on the relationship between environmental performance and enterprise value.

Conclusion: (1) The higher the environmental performance of listed companies in heavily polluting industries, the lower the debt financing cost. (2) There is a significant positive correlation between the environmental performance of listed companies in heavily polluting industries and their enterprise value. (3) There is a positive correlation between the cost of debt financing and the enterprise value of publicly traded polluting industries. The relationship between environmental performance and enterprise value is moderated by the cost of debt financing for publicly traded companies in heavily polluting industries.

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