scholarly journals Will the Reduction of CO2 Emissions Lower the Cost of Debt Financing? The Case of EU Countries

Energies ◽  
2021 ◽  
Vol 14 (24) ◽  
pp. 8361
Author(s):  
Sylwester Kozak
Keyword(s):  
Co2 Emissions ◽  
Risk Premium ◽  
Cost Of Debt ◽  
Public Authorities ◽  
Eu Countries ◽  
Debt Capital ◽  
Reduction Of Co2 ◽  
The Cost ◽  
The Relationship ◽  
A Company

The main objective of this article is to test the relationship between the intensity of CO2 emissions and company’s cost of debt capital. This study fills a gap in the financial literature on this compound by examining a sample of 225 large nonfinancial enterprises operating in 15 EU countries in the years 2018–2021. The fractional logit regression controlling for company’s characteristics (assets, profitability, liquidity and leverage) was used. The results show that by reducing the intensity of CO2 emissions, a company can reduce the cost of debt. This relationship was confirmed for three measures of intensity, i.e., CO2 emissions in relation to revenues, assets and number of employees. Markets and financial institutions impose an additional risk premium in relation to companies operating in an industry considered to be comprised of strong CO2 emitters. The use of the latest data for a wide sample of European enterprises provides an up-to-date assessment of the analyzed issues and the results can be used by enterprises and public authorities when analyzing the benefits of implementing a technology that reduces CO2 emissions.

scholarly journals The Effect of Managerial Share Pledges on the Cost of Debt

2021 ◽  
Vol 50 (6) ◽  
pp. 617-650
Author(s):  
Soonhong Park ◽  
Hyeon Sook Kim ◽  
Byungkwon Lim
Keyword(s):  
Ownership Structure ◽  
Risk Taking ◽  
Risk Premium ◽  
Firm Value ◽  
Positive Relationship ◽  
Cost Of Debt ◽  
Controlling Shareholders ◽  
Managerial Risk ◽  
The Cost ◽  
The Relationship

We examines whether share pledges by controlling shareholders influence a firm’s cost of debt. We also investigate whether the relationship between share pledges and the cost of debt stems from the managerial risk-taking incentives or pursuing the private benefits of controlling shareholders. We make three major findings. First, we find the cost of debt is higher in firms with share pledges than in firms without share pledges. Furthermore, we identify a positive relationship between the cost of debt and the level of share pledges. Second, we find that there is no increased corporate financial leverage or investment activities in firms with share pledges. Finally, our empirical evidence demonstrates that the positive relationship between share pledges and cost of debt is more pronounced for lower foreign institutional investor stakes or higher controlling shareholders ownership. Overall, the results indicate that share pledges by controlling shareholders negatively affect the cost of debt. However, the effect of share pledges on the cost of debt is differently influenced by a firm’s ownership structure. Our findings suggest that share pledges induce stockholder-bondholder conflict, and the bondholder requires more risk premium due to the decrease of firm value.

scholarly journals The effect of tax avoidance on cost of debt capital: Evidence from Korea1

2017 ◽  
Vol 48 (4) ◽  
pp. 83-89 ◽  
Author(s):  
H-J. Shin ◽  
Y-S. Woo
Keyword(s):  
Empirical Analysis ◽  
Tax Avoidance ◽  
Cost Of Debt ◽  
Debt Ratio ◽  
Positive Relation ◽  
Critical Factors ◽  
Information Risk ◽  
Debt Capital ◽  
The Cost ◽  
A Company

This study investigates the relation between tax avoidance and the cost of debt capital and analyzes the effect of the debt ratio and profitability on the relation between tax avoidance and the cost of debt. The results of our empirical analysis are as follows. First, tax avoidance is significantly positively associated with the cost of debt capital. This result shows that tax avoidance is considered as the signal of increasing information risk; thus, investors demand a higher return. Second, the debt ratio decreases the positive relation between tax avoidance and the cost of debt capital. This result indicates that the positive relation between tax avoidance and the cost of debt capital significantly decreases when the debt ratio is high. Finally, we find that the profitability of a company increases the positive relation between tax avoidance and the cost of debt capital. This result means that the cost of debt capital increases as the tax avoidance increase when the profitability of company is favorable. We find that the profitability of a company is one of the critical factors that have an effect on the relation between tax avoidance and the cost of debt capital.

scholarly journals The Relationship Between the Intellectual Capital Disclosure and Cost of Debt Capital – A Case of Slovenian Private Audited Organisations

2017 ◽  
Vol 63 (4) ◽  
pp. 3-16 ◽  
Author(s):  
Neca Stropnik ◽  
Bojana Korošec ◽  
Polona Tominc
Keyword(s):  
Empirical Research ◽  
Intellectual Capital ◽  
Cash Flows ◽  
Annual Reports ◽  
Cost Of Debt ◽  
Additional Information ◽  
Debt Capital ◽  
Agency Issues ◽  
The Cost ◽  
The Relationship

AbstractThe existing empirical research into the association between intellectual capital disclosures by organisations and the cost of debt is scarce or is based solely on the samples of the (large) listed organisations. Since agency issues between management/owners and lenders exist also in (large) private organisations whose financing is greatly dependent on loans and whose audited annual reports can be a source of additional information for external users, we performed an empirical research to find the answer to the question whether the level of intellectual capital disclosure (as a whole and of its sub-categories) of organisations is associated with the cost of their debt capital. Our study was performed on a sample of private Slovenian organisations with audited annual reports. The results of our research did not reveal that lenders would take into account intellectual capital disclosures by Slovenian private audited organisations as the information about the potential for their future cash flows when deciding on the cost of debt issued to these organisations.

scholarly journals The cost of debt capital revisited

2018 ◽  
Vol 12 (2) ◽  
pp. 721-753 ◽  
Author(s):  
Rainer Baule
Keyword(s):  
Cost Of Debt ◽  
Debt Capital ◽  
The Cost

The 2008–2009 global financial crisis and the cost of debt capital among SMEs: Swedish evidence

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Darush Yazdanfar ◽  
Peter Öhman
Keyword(s):  
Financial Crisis ◽  
Large Scale ◽  
Global Financial Crisis ◽  
Dynamic Panel Data ◽  
Cost Of Debt ◽  
Cross Sectional ◽  
Content Type ◽  
Debt Capital ◽  
Using Data ◽  
The Cost

PurposeThe main purpose of this study is to describe and analyse the relationship between the 2008–2009 global financial crisis and small and medium-sized enterprises' cost of debt capital.Design/methodology/approachStatistical methods, including multiple OLS and dynamic panel data, were used to analyse a longitudinal cross-sectional panel dataset of 3865 Swedish SMEs operating in five industry sectors over the 2008–2015 period.FindingsThe results suggest that the cost of debt was influenced by the financial crisis and another macroeconomic factor, i.e. the interbank interest rate, and by firm-specific factors such as firm size and lagged cost of debt.Originality/valueTo the authors' best knowledge, this is one of few studies to examine the cost of debt among SMEs during the crisis and post-crisis periods using data from a large-scale, longitudinal, cross-sectional database.

scholarly journals ESG Scores and the Credit Market

2020 ◽  
Vol 12 (8) ◽  
pp. 3456 ◽  
Author(s):  
Ga-Young Jang ◽  
Hyoung-Goo Kang ◽  
Ju-Yeong Lee ◽  
Kyounghun Bae
Keyword(s):  
Small Firms ◽  
Credit Rating ◽  
Credit Ratings ◽  
Debt Financing ◽  
Corporate Bond ◽  
Cost Of Debt ◽  
Rating Agencies ◽  
Bond Returns ◽  
The Cost ◽  
The Relationship

This study analyzes the relationship between Environmental, Social and Governance (ESG) scores and bond returns using the corporate bond data in Korea during the period of 2010 to 2015. We find that ESG scores include valuable information about the downside risk of firms. This effect is particularly salient for the firms with high information asymmetry such as small firms. Interestingly, of the three ESG criteria, only environmental scores show a significant impact on bond returns when interacted with the firm size, suggesting that high environmental scores lower the cost of debt financing for small firms. Finally, ESG is complementary to credit ratings in assessing credit quality as credit ratings cannot explain away ESG effects in predicting future bond returns. This result suggests that credit rating agencies should either integrate ESG scores into their current rating process or produce separate ESG scores which bond investors integrate with the existing credit ratings by themselves.

scholarly journals Analysis of the structure and cost of capital in mining enterprises

2017 ◽  
Vol 33 (1) ◽  
pp. 77-92 ◽  
Author(s):  
Robert Ranosz
Keyword(s):  
Capital Structure ◽  
Cost Of Capital ◽  
Cost Of Debt ◽  
Cost Of Equity ◽  
Mining Company ◽  
Optimal Capital Structure ◽  
Mining Companies ◽  
Debt Capital ◽  
Capital Funding ◽  
The Cost

AbstractThis article focuses on the analysis of the structure and cost of capital in mining companies. Proper selection of appropriate levels of equity and debt capital funding of investment has a significant impact on its value. Thus, to maximize the value of the company, the capital structure of the company should be composed to minimize the weighted average cost of capital. T he objective of the article is to present the capital structure of selected Polish and world’s mining companies and estimate their cost of equity and debt capital. In the paper the optimal capital structure for the Polish mining company (KGHM SA) was also estimated. It was assumed that both Polish and world’s mining companies, have no debt exceeding 45% in the financing structure. For the most of analyzed cases, the level of financing with debt capital is in the range between 10% and 35%. T he cost of equity exceeds the cost of debt capital and is in the range between 8% and 20%, while the cost of debt capital reaches the range between 1.9% and 12%. T he analysis of the optimal capital structure determining, performed for the selected mining company, showed that debt capital funding for the company should be in the range between 5.7% and 7.4%.

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