Carbon intensity, default risk, and investors’ attention to environment: Evidence from South Korea

Dojoon Park, Yong Joo Kang and Jiyoon Lee

International Review of Economics & Finance, 2023, vol. 88, issue C, 1104-1121

Abstract: We investigate the relationship between carbon intensity and default risk for South Korean firms and examine the role of investor attentiveness to environmental issues on this relationship. Using carbon emissions and Merton's distance-to-default, we find that carbon intensity is significantly negatively associated with the distance-to-default and that the negative association strengthens when foreign ownership is high. Furthermore, we find that default risk for firms subject to the South Korean emissions trading system increased after its adoption. Our results are robust to different default risk proxies and highlights the negative impact carbon intensity has on default risk for South Korean firms.

Keywords: Carbon intensity; Carbon emissions; Default risk; Distance to default; Investor attention (search for similar items in EconPapers)
JEL-codes: G30 G32 Q54 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:88:y:2023:i:c:p:1104-1121

DOI: 10.1016/j.iref.2023.07.023

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