Carbon risk and the cost of bank loans: Evidence from China

Bo Zhu and Yue Zhao

Technological Forecasting and Social Change, 2022, vol. 180, issue C

Abstract: This study examines whether and how carbon risk affects the cost of bank loans using Chinese listed industrial firms from 2009 to 2019. We find a significantly positive relationship between carbon risk and the cost of bank loans. Considering the introduction of the China Green Credit Guidelines in 2012 as an exogenous shock, the positive effect of carbon risk on the cost of bank loans for a firm is more significant. In the cross-section, the positive effect is more pronounced for firms with low environmental performance, firms with low green innovation, firms in high-carbon industries, and non-state-owned enterprises. Furthermore, we document that a firm's profitability and earnings volatility are two underlying channels through which carbon risk affects the cost of bank loans. These findings are robust to addressing endogeneity concerns with the use of propensity score matching and instrumental variables methods, to alternative model specifications and proxies for carbon risk.

Keywords: Carbon risk; Cost of bank loans; Green credit (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0040162522002670
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:tefoso:v:180:y:2022:i:c:s0040162522002670

DOI: 10.1016/j.techfore.2022.121741

Access Statistics for this article

Technological Forecasting and Social Change is currently edited by Fred Phillips

More articles in Technological Forecasting and Social Change from Elsevier
Bibliographic data for series maintained by Catherine Liu ().