Research On The Impact Of Environmental Regulation On The Cost Of Equity Capital Of Heavily Polluting Enterprises

Environmental pressure urges the Chinese government to strengthen environmental governance.As the micro subject of economic activities,the business activities of enterprises are ultimately affected by environmental regulation,which determines the result of environmental regulation policies.Cost of capital is not only the required rate of return for shareholders,but also the benchmark for major decisions such as investment and financing of enterprises,so it should be the core parameter of government environmental regulation.At present,China's economy is still relying on the accumulation of factor to stimulate growth.Once the input of factor,especially capital factor is insufficient,the rapid economic growth is difficult to maintain.For micro enterprises,only by maintaining the cost of capital at an acceptable level,can more capital be attracted into the enterprise.The fluctuation of capital cost of heavy polluting enterprises will be directly affected by environmental regulations.The essence of government environmental regulation is to reduce the production efficiency of backward production capacity and gradually eliminate it.One of the direct result of enterprise management is the backward production mode of enterprise activities can not survive,because it is difficult to obtain financial support,that is,the increase of enterprises' cost of capital.At the same time,environmental regulations force enterprises to update equipment or upgrade technology to achieve production transformation,which will inevitably affect the capital cost of enterprises.It can be seen that in this context,the study of the impact of environmental regulation on micro enterprises,especially the cost of capital,involves many aspects,such as government environmental regulation,corporate governance and development transformation of enterprises.Therefore,whether from the perspective of government regulation,or from the perspective of corporate finance and investors,we need to study the cost of capital result of environmental regulation.The scientific environmental regulation of heavy polluting enterprises must be a "winwin" regulation,which not only improves the environment and satisfies the social public welfare,but also guarantees the reasonable interests of investors,improves the performance and sustainable development of regulated enterprises.Exerting environmental pressure on polluting enterprises will lead to the high cost of capital and the loss of the return of investors.In serious cases,it will directly threaten the survival of enterprises,which is obviously not conducive to China's economic reform and smooth transformation.In the 2019 government work report,government attached importance to the reasonable demands of enterprises,corrected the simple and crude environmental supervision mode,strengthened the assistance and gived reasonable transition period to polluting enterprises.We should make efforts to improve the scientific nature of environmental regulation,and combine all kinds of regulatory means that have differential impact on cost of capital,so as to enhance the sustainability of environmental regulation and enterprise development.There are great theoretical and practical significances to study the different effects of different environmental regulation modes on cost of capital of heavy polluting enterprises,to explore the balanced development mode of economic growth and environmental protection,and to realize the harmonious interaction among government regulation,enterprise activities and ecological environment.But unfortunately,the previous researches,especially the domestic scholars' researches on the impact of environmental regulation on the cost of capital are still very limited.Therefore,this paper starts with the cost of capital,to explore the impact of government regulation on heavily polluting enterprises.The relevant conclusions can be used as a reference for the government to further improve the design of environmental regulation mechanism,and provide suggestions for enterprises to reasonably adjust their own business activities under the regulatory constraints.This paper takes non-financial A-share listed companies from 2000 to 2018 as samples,and uses unbalanced panel data to do the following research:(1)Taking the establishment of the ministry of environmental protection as the policy time point,this paper studied the difference of the cost of capital between heavily polluting enterprises and non-heavily-polluting enterprises.(2)Using panel data fixed effect model,this paper examined the relationship between environmental regulation intensity and cost of capital in heavily polluting enterprises,and used Hamamoto(2006)to estimate the change of capital cost caused by environmental regulation and tested its impact on environmental performance.(3)Examined the difference impact of different environmental regulation on the cost of capital in heavily polluting enterprises.(4)Based on the differential impact of environmental regulation,the intermediary role of corporate behavior between environmental regulation and the cost of capital was verified,and the impact of corporate heterogeneity on this intermediary effect is further tested.The research shows that:(1)In the period of slack regulation,the cost of capital in heavily polluting enterprises was loewr than that of non-heavily-polluting enterprises.In the period of tight regulation,the cost of capital in heavily polluting enterprises was higher than that of nonheavily-polluting enterprises.(2)With the strengthening of environmental regulation,the cost of capital in heavily polluting enterprises had increased,and the difference of cost of capital among heavily polluting enterprises had expanded;the change of cost of capital in heavily polluting enterprises caused by environmental regulation was negatively correlated with the regional environmental performance.(3)The "service-oriented" regulation for regional environmental construction and the "constraint-oriented" regulation for enterprise behavior have different effects on the cost of capital in heavily polluting enterprises.(4)Enterprise behavior played an intermediary role between environmental regulation and capital cost: "constraint-oriented" environmental regulation increased enterprises' capital expenditure,"service-oriented" regulation was the opposite;through the promulgation of environmental protection laws,rules and technical standards,"constraint-oriented" regulation could inhibit the regulatory capture behavior of enterprises.The conclusion of this paper showed that although the "service-oriented" regulation shareed the environmental pressure of enterprises and reduces the cost of capital in heavily polluting enterprises,the "constraint-oriented" regulation which increased the capital cost of heavily polluting enterprises would help enterprises increased capital expenditure and promoted the transformation of enterprises from heavy pollution to cleaner production.The main innovations of this paper are as follows: Firstly,unlike previous studies on measuring the regulation intensity by a single or comprehensive indicator,this paper further classified the means of environmental regulation on the basis of the differentiated impact on the cost of capital.It avoided the problem of using a single index with different emphasis,which leaded to different research conclusions.Second,on the basis of classification of environmental regulation methods,this paper further considered the spatial effects brought by different regulatory measures.Thirdly,based on the differential impact of environmental regulation,the intermediary role of corporate behavior between environmental regulation and cost of capital was further validated.This was different from previous researches on whether environmental regulation could help promote R&D in enterprises.Because in addition to R&D activities involving long-term strategy of enterprises,the most direct impacts of environmental regulation on heavily polluting enterprises was whether large-scale capital expenditure was needed to update backward technology,or to obtain a more relaxed regulatory environment through bargaining with local governments.