The Impact Of Environmental Regulation On Debt Financing Costs

With the rapid rise of the economic level,development of enterprises is becoming more diversified,and the environmental problems are also showing an not optimistic situation.How to achieve sustainable green development of enterprises has become an important problem which needs to be solved.Driven by the revision of the Environmental Protection Law of the People's Republic of China in 2014 and the promotion of the 18 th and 19 th National Ecological Civilization and the concept of “green development”,China is continuously strengthening environmental regulation and gradually improving the innovation of environmental regulatory systems.Heavily polluting enterprises face to the strict environmental regulation of standards and regulation.However,strict environmental regulation also restrict the effects of economic development while restricting corporate environmental behavior.Under environmental regulation,both enterprises and governments are facing a dilemma that government must not only achieves the goal of promoting economic growth,but also guides the green development of enterprises;and the green development of enterprises also has the dilemma of insufficient funds.As the major source of corporate funding,debt financing provides financial support for environmental protection investment.However,with the increase of environmental regulation intensity,the risk of heavily polluting enterprises projects are increased at any time,the sensitivity of creditor risk perception is enhanceing and requiring higher capital costs.However,government environmental regulations are an important regulatory mechanism for enterprises to achieve sustainable development.Therefore,it is particularly important toidentify the dilemma faced by enterprises during policy implementation and to achieve positive interaction between government environmental regulation and low-cost debt financing.At present,most of China's scholars focus on the effect of environmental regulation on technological innovation?production efficiency?environmental performance?environmental protection investment and others,scholars have not paid more attention to environmental regulation and debt financing costs.Therefore,according to the theory of legality and the theory of environmental risk perception,based on the panel data of listed companies in China's A-shares in 2012-2017,using the “revenue-cost” analysis framework to studies whether the increase environmental regulation will increase the debt financing costs of heavily polluting enterprises,and analyzing the adjustment effect of the scale of enterprises and the property rights.The results show that:(1)The greater intensity of environmental regulation,the higher the debt financing costs of listed companies in heavily polluting industries;(2)Large-scale enterprises and state-owned enterprises have a moderating effect on the positive relationship between environmental regulation and debt financing costs;(3)Environmental regulation has increased corporate financing costs while increasing corporate financing constraints.Further analysis found that environmental regulation affects corporate debt financing costs through the path of liquidity risk;The research in this paper studies the effects of environmental regulation on the costs of debt financing and confirms that environmental regulation affects debt financing costs through the path of liquidity risk,enrich the relevant literature on debt financing costs and have great significance for enterprises and the government regulatory institutions.