The impact of air pollution on the cost of debt financing: Evidence from the bond market
研究了中国企业债券数据，发现空气污染越严重，企业发债成本越高，信用风险和财务不确定性是传导渠道，而良好的公司治理和外部监督能缓解这一影响。
Abstract This study investigates whether bond markets reflect firms' exposure to air pollution through an increased cost of debt financing; and, if so, whether firms can mitigate this air pollution penalty via effective governance and active monitoring. Using 1067 bonds issued by Chinese firms, we document a positive association between air pollution and the cost of debt financing, and this association is robust and economically meaningful. Specifically, with a one standard deviation increase in air pollution severity, a firm's bond yield spread increases approximately 16% relative to an average bond. Additional analysis suggests that credit risk and financial uncertainty are the transmission channels. Our results also confirm that strengthened corporate governance, active board and external monitoring, and a stabilized economic environment further enhance the impact of air pollution on a firm's cost of debt. Overall, air pollution has a material change in a firm's business strategy in using debt.