Corporate Carbon Emissions and the Costs of Bank Borrowing: Evidence From an Emerging Market

This study investigates the relationship between the costs of bank borrowing and carbon emissions disclosures and amounts. Given the increasing emphasis on climate risk, several relevant regulations and enforcement measures have been designed and implemented, which have resulted in policy uncertainty. This led to the downward risks that banks, a common financial channel—particularly in Asia, emphasize when providing loans. We use data on listed companies in Taiwan, which face weaker governmental enforcement measures but higher pressure from the private sector to reduce emissions. The results using data from 2013 to 2021 show that companies disclosing emissions information or having lower emissions have lower costs of bank borrowing. The results of additional tests show that this relationship exists only for companies with medium or worse corporate governance performance and a medium level of governmental ownership and foreign institutional ownership.