Corporate carbon dioxide emissions and the cost of debt financing: Evidence from the global tourism industry

In this article, we investigate the value consequence of a firm's irresponsible environmental behavior, carbon dioxide emissions, through the lens of lenders and bondholders. We firstly find that a firm's carbon risk significantly enhances the cost of debt financing. In particular, we find that the positive nexus between a firm's carbon emissions and the cost of debt has a great discrepancy in countries which have different institutions, cultures, and strength of legal rights. Our empirical evidence suggests that corporate environment risk may raise default risk and ultimately provoke creditors to enhance their required returns. Furthermore, our findings also are consistent with the viewpoints of stakeholders and ethical theories.