Does GHG reduction matter for external funding in green countries? New evidence on the role of environmental policies

Ones Amri and Hasna Chaibi

Journal of Sustainable Finance & Investment, 2025, vol. 15, issue 4, 811-835

Abstract: Motivated by the regulatory pressure from environmental policies, our study aims to analyse the effect of greenhouse gases (GHG) reduction on debt maturity, as well as the moderating effect of environmental policies in this relationship. Using a sample of 695 firms from green countries over the period 2005–2020, we find that reducing GHG emissions decreases debt maturity, supporting both agency and signalling theories. Furthermore, we reveal that the environmental policies play a crucial role in attenuating the positive effect of GHG emissions on debt maturity, confirming the role of legitimacy in the context of green countries. Our results remain robust across different estimation techniques, including FGLS and 2SLS, as well as alternative measures of debt maturity and environment policies. We also account for the growth levels across our sample, confirming the consistency of our findings. Ultimately, our study highlights that adherence to environmental policies facilitates firms’ access to the long-term debt market.

Date: 2025
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DOI: 10.1080/20430795.2025.2492661

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