The Study of Comprehensive Risk Management and Corporate Finance Constraints

The reasons why companies implement comprehensive risk management and the benefits it can bring to companies have been a subject of academic interest. However, there is still room for further exploration of this topic for the following three reasons: firstly, most of the existing literature is focused on the study of corporate performance and value, and there is less research on the level of corporate financing constraints; secondly, a few papers have initially explored the relationship between the implementation of comprehensive risk management and corporate financing costs, but the research on the intrinsic impact mechanism remains at the theoretical level and lacks empirical testing Finally, comprehensive risk management has been a hot topic in recent years, but most of the literature has focused on developed countries such as Europe and the US, and domestic research is still very limited. Therefore, this paper attempts to empirically test how the implementation of comprehensive risk management affects corporate financing constraints, in the hope that it can complement the existing literature.

The Impact of Climate Change On Financing Cost of Heavy-Pollution Firms in China

We examines the effects of climate change on the financing cost of heavy-pollution firms using firm-level panel data analysis. The empirical results demonstrate that the annual temperature and precipitation changes can significantly promote the financing costs of heavy-pollution firms, the positive impacts of annual temperature and precipitation changes on the financing costs of large, medium and small heavy-pollution firms has shown a gradual weakening trend with an increase of firm size, and the positive effects of annual temperature and precipitation changes on the financing costs of younger and older heavy-pollution firms has shown a decline trend with an increase of firm age. The evidences confirms that the impact of climate change on the financing costs of heavy-pollution firms exhibit a significant firm size and age discrimination of financing behaviors. Government decision-makers have to identify and optimize the transmission effect of climate change response on financing behavior decisions of heavy-pollution industries, financial institutions alleviate financial conflicts and credit discrimination behaviors and optimize the efficiency of financial resource allocation. Firms’ executives correct climate change strategy, optimize the climate- relevant operation, investment and financing activities, and alleviate unfavorable influences of climate changes for heavy-pollution firms.

Corporate Carbon Disclosure, Financing Structure and Total Factor Productivity: Evidence from Chinese Heavy Polluting Listed Corporates

Low-carbon economy has become the current global economic development trend, and Corporate carbon disclosure has attracted more and more attention from scholars and investors. This paper creatively explores the mechanism of corporate carbon disclosure quality on total factor productivity with financing structure as a mediating variable. The content analysis method is used to construct a carbon disclosure evaluation index system that is suitable for Chinese companies. Through the mediating effect model and Sobel test, the internal mechanism of carbon disclosure quality affecting total factor productivity is analyzed, with Chinese heavy polluting listed corporates from 2015 to 2018 as research samples. The empirical results show that, Firstly, the Quality of carbon disclosure has a positive effect on the improvement of total factor productivity. The effect of monetary carbon disclosure quality on the improvement of total factor productivity is higher than that of non-monetary carbon disclosure quality. Secondly, the financing structure has a mediating effect on the quality of carbon disclosure and total factor productivity, and the mediating effect of internal financing capabilities is better than those of external financing costs. Finally, external financing costs and internal financing capabilities have mediating effects in both heterogeneous carbon disclosure quality and total factor productivity. The mediating effect of internal financing capabilities is significantly higher than the mediating effect of external financing costs. Meanwhile, the effect of monetary carbon disclosure quality on total factor productivity indirectly through internal financing capabilities is higher than that of non-monetary carbon disclosure quality.

Policy Uncertainty and Textual Disclosure

We study how policy uncertainty influences textual disclosure in the U.S. from 1996 to 2015. Consistent with incentives for voluntary disclosure, we find that policy uncertainty increases textual disclosure quantity, as evident in disclosure length, but lowers textual readability and increases the tone of uncertainty and negativity. We also document that the negative impact on readability subsides when firms are subject to tough external monitoring. Finally, we provide evidence implying that investors perceive such disclosure to be valuable, as evident in cheaper equity financing costs under economic policy uncertainty.

Will environmental information disclosure affect bank credit decisions and corporate debt financing costs? Evidence from China's heavily polluting industries

In the context of green finance, whether listed companies in heavily polluting industries can convert the external pressure of environmental information disclosure into internal motivation is critical to achieving environmental governance goals. This paper selects 946 listed companies of 16 heavily polluting industries in the Shanghai and Shenzhen stock markets as samples to explore whether environmental information disclosure can help companies increase bank credit support and reduce debt financing costs to transform their external pressures into internal motivation. The empirical results show that there is a significant positive correlation between environmental information disclosure and bank credit decisions. From the perspective of financing scale, heavily polluting companies have the inherent motivation to disclose environmental information actively and proactively to obtain more credit support. There is no significant relationship between the corporate debt financing cost and environmental information disclosure. This paper puts forward some critical policy suggestions for government decision makers, heavily polluting enterprises and financial institutions.

Financial impact of using EUR call options to hedge accounts receivables

International business has grown rapidly in recent years as companies seek to take advantage of expanding supply chain opportunities. As companies enter into contracts to take advantage of engineering, production, and cost reduction capabilities of the global supply chain, they may be creating a foreign currency exchange rate risk. The purpose of this research was to determine the EUR/USD exchange rate risk within a relatively short time frame such as in 60-day accounts receivable and if using currency options to hedge this risk would be financially beneficial on a transactional basis. The quantitative study examined the 60-day EUR/USD exchange rate fluctuation and the use of currency call options to hedge the risk associated with EUR/USD currency fluctuations. The researcher analyzed 13 years of historical EUR/USD currency data and 10 years of actual EUR call options premiums for this research paper. The researcher concluded that the variability of the EUR/USD over 60-days does pose financial risk to a company. The study also found that using currency call options to hedge this 60-day exchange rate risk resulted in an overall transactional financial loss as compared to no hedging. However, research studies have shown that the use of hedging instruments to smooth financial results may result in lower overall financing costs which could offset the hedging transactional costs. This study did not address the benefits of the use of hedging to smooth financial results or obtain other related financial benefits. The researcher recommends that a firm should recognize the exchange rate risks it may be establishing within 60-day EUR or USD payable contracts and develop an appropriate hedging strategy.

Nuclear climate ambitions to fall short globally

Significance Recent increases in fossil fuel prices have reinforced such claims by raising considerations of cost-effectiveness and energy security. Impacts Pressure from pro-nuclear EU states will see nuclear power treated as a sustainable energy resource alongside other low-carbon options. High fossil fuel prices appear to enhance the case for nuclear, but their impacts may be relatively transient if prices fall back. Lasting high prices, bringing higher inflation and interest rates, may affect financing costs, hitting new nuclear investments’ viability.

Rice crop insurance in Indonesia: adaptation to climate and farm production support

Indonesia’s Rice Crop Insurance (AUTP) scheme has successfully protected farmers from significant crop losses due to natural disasters. However, the current amount of AUTP’s compensation is still unable to accommodate farmer’s financing costs (i.e., unpaid micro-loan and its interests) to support crops production. This results in higher micro-loan risk and hinder the sustainability of farming enterprises. In this regard, the existing People’s Business Credit (KUR) should supposedly be accessible as a micro-loan source to help farmers fund their farms. This study has two objectives: (1) formulate an integration scheme between KUR and AUTP, and (2) determine the appropriate insurance premiums to meet the farmer’s operational and financing costs. This research used 100,000 Monte Carlo Simulations using lognormal distributions with assumptions based on the results of focus group discussion and in-depth interviews with farmer groups, the local Agriculture Service, and micro-loan distributors, as well as the data from the Ministry of Agriculture from the period of 2018–2020. Additionally, Individual Area Yield Index (I-AYI) policy and loss ratio is used to determine and evaluate the new integrated crop insurance premiums. The study revealed that the farmers expect affordable, accessible, and beneficial insurance products with premium subsidies bundled with KUR. Therefore, the government should develop an integration of crop insurance with KUR and determine the affordable premium calculations along with the insurance companies. Based on the simulation results, the total pure premium is estimated around IDR 1 million for a minimum KUR loan of IDR 8 million (suitable for farming costs).