A Study Of The Relationship Between The Cost Of Debt And Environmental Performance

The cost of debt refers to enterprises raise and use pay debt capital, is part of the cost of capital. Constitute a point of view, the cost of debt financing costs and charges. In essence, the cost of debt is the return on investment required by the creditor. Assume that there is no financing costs, the cost of debt is equal to the risk-free rate and debt default risk compensation rate and.China’s current financial policies and environmental regulations, the environmental performance of enterprises will have an impact on the cost of debt. The one hand, China is gradually promote the concept of green finance, financial regulatory authorities repeatedly requested to strictly control high energy consumption, high pollution and resource-industry credit, but also repeatedly pointed out that intends to use the "green credit" is included in the assessment of the financial institutions the system. Thus poor environmental performance of enterprises to obtain loans from financial institutions to increase the difficulty of these enterprises to obtain loans from financial institutions had to increase the cost of debt financing. Environmental performance of enterprises, on the other hand, may be punished by law, the company’s products may lose market share due to public opinion, the occurrence of these events will lead to the company’s cash outflow or decline in performance, resulting in the company’s debt default risk increases, so the creditors have reason to demand a higher rate of return. From these two perspectives, the poor environmental performance of enterprises, the cost of debt will be relatively higher.This study selected textile, paper two heavy polluting industries55listed companies as research samples, empirical analysis to test the relationship between environmental performance and the cost of debt. Wherein, the environmental performance of the sample value is by collecting a sample of the environmental information, quantization system according to the environmental performance of the design, the use of the method of rated. The empirical results show that there is a significant negative correlation between environmental performance and the cost of debt, the environmental performance of listed companies, with a lower cost of debt.This conclusion is worth managers’ attention. Enterprises to improve their environmental performance, can reduce the environmental risks, lower cost of debt, which always reduce the cost of capital, internships value added. Managers can establish an environmental risk management system, and consciously disclosure of corporate environmental information, and improve the internal environment includes system and initiated environmental performance self-evaluation to improve the company’s environmental performance.