Impact of environmental information disclosure and real estate segments on cost of debt: Evidence from the Chinese real estate industry

Mohan Fonseka, Gao‐Liang Tian and Omar Al Farooque

Economics of Transition and Institutional Change, 2020, vol. 28, issue 1, 195-221

Abstract: The novel part of this paper is to examine the individual and joint effects of the real estate segments (RETs) and environmental information disclosure (EID) on the cost of debt (COD) in the real estate industry in China. Building on extant literature, using 1,250 firm‐year observations from 2006 to 2016 and applying both Feasible General Least Squares and Two‐stage Least Squares Instrumental Variable approaches, we provide evidence that the commercial RET leads to an increase in the COD, while EID leads to a decrease in the COD. The joint effects of the RETs and EID on the COD indicate a significantly positive relationship with the COD. This signifies that even with the increased levels of EID in commercial real estate sectors, its COD is higher than for residential real estate sectors. These findings have important policy implications for environmental risk assessments for real estate sectors, their lending institutions and wider stakeholder groups.

Date: 2020
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https://doi.org/10.1111/ecot.12238

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Persistent link: https://EconPapers.repec.org/RePEc:wly:ectrin:v:28:y:2020:i:1:p:195-221

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