Do Lenders Applaud Corporate Environmental Performance? Evidence from Chinese Private-Owned Firms

Xingqiang Du (), Jianying Weng (), Quan Zeng (), Yingying Chang () and Hongmei Pei ()
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Xingqiang Du: Xiamen University
Jianying Weng: Xiamen Ocean Vocational College
Quan Zeng: Xiamen University
Yingying Chang: Xiamen University
Hongmei Pei: Xiamen University

Journal of Business Ethics, 2017, vol. 143, issue 1, No 11, 179-207

Abstract: Abstract This study extends previous literature on the association between corporate social responsibility and corporate financial behavior by investigating the influence of corporate environmental performance on the cost of debt. Using a sample of Chinese private-owned firms, we document strong and consistent evidence to show that corporate environmental performance is significantly negatively associated with the interest rate on debt—the proxy for the cost of debt. The findings suggest that lenders applaud better environmental performance. Moreover, internal control attenuates the negative association between corporate environmental performance and the interest rate on debt, implying substitutive effects between corporate environmental performance and internal control on the reduction of interest rates on debt. The results are robust to various sensitivity tests and are still valid after controlling for the potential endogeneity between corporate environmental performance and the interest rate on debt.

Keywords: Corporate environmental performance; The interest rate on debt; Internal control; Lenders; Chinese private-owned firms (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (53)

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DOI: 10.1007/s10551-015-2758-2

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