The impact of corporate environmental management on the cost of debt financing: evidence from Europe, Japan and Australia.

Abstract

This study investigates the impact of the corporate environmental management on firms’ cost of debt financing. Using environmental scores issued by Thomas Reuters on 138 firms in Europe from 2007 to 2016, I find that environmental performance has a negative relationship with the cost of debt financing. This relationship holds in Europe and for bonds whose maturity is higher than five years. However, the economic significance of this relationship is modest, suggesting that the environmental management has a minor influence on firms’ risk. Those results are robust to alternative model specifications and industry membership.