| In response to the global net-zero target for carbon emissions,Measures for Corporate Environmental Credit Evaluation was jointly released by the former Chinese Ministry of Environmental Protection,the National Development and Reform Commission,the People’s Bank of China and the former Chinese Banking Regulatory Commission in 2013.According to the document,corporate performance in following environment-related rules and fulfilling their duties in environmental protection will be rated and the results are released as references for public supervision and decision-making by financial institutions when granting loans.How “environmental credits” of companies influence the treatment they get in stock market?By hand-collecting data on the environmental credit of companies and matching the data with listed companies and their subsidiaries to construct the environmental performance indicators of listed companies,This paper investigate the relationship between the cost of equity capital and the environmental performance of listed companies.Using several approaches to estimate companies’ ex ante equity financing costs,the empirial findings are concluded as follow:(1)the regressions that control for company-level characteristics as well as industry and years effects indicate that better environmental performance of a company results in lower cost of equity capital.In terms of economic magnitude,a onestandard-deviation(0.680)increase in the environmental performance measure is associated with approximately a 0.27% decrease in the cost of equity capital,which corresponds to 2.62%of our sample mean(0.104).(2)On the one hand,exclusionary investing by long-term institutions leads to the lack of risk sharing for shareholders of polluting companies,which accordingly leads to higher cost of equity capital of polluting companies.On the another hand,companies with better environmental performance choose disclosure of high-quality environmental information,which ease the information asymmetry and reduce the cost of equity caoital.However,the role of environmental information disclosure decreases with the improvement of the level of government environmental information disclosure.(3)In the cross-sectional test,the effects of environmental performance on cost of equity capital are amplified by external finance dependence.(4)The increase in the cost of equity capital enhances the green innovation of polluting companies through financial pressure.This paper use corporate environmental credit rating data from China to construct corporate environmental performance indicators,which not only expands the measurement method of corporate environmental performance,but also verifies the effectiveness of corporate environmental credit rating policy in China from the perspective of stock market.This paper put forward some policy suggestions according to the empirical results.(1)Environmental protection departments at the provincial levels should unswervingly carry out corporate environmental credit rating and establish a special corporate environmental credit disclosure platform.(2)Financial regulators should optimize green equity financing services and incorporate environmental risk into the reference for corporate listing financing or refinancing pricing.(3)Companies should actively carry out environmental risk management and environmental information disclosure to release the "green" signal to the capital market. |
