This paper uses the staggered difference-in-differences design to investigate the effects of the low-carbon city pilot (LCCP) policy on the cost and underlying mechanisms of debt financing for enterprises. Our findings show that the LCCP significantly decreases the debt cost of enterprises through enhancements in Environmental, Social, and Governance (ESG) performance and the reduction of information asymmetry. Additional analysis indicates that the LCCP’s ability to reduce the cost of debt is particularly pronounced for firms with higher agency costs and those located in China’s eastern regions. This study offers evidence for assessing the effectiveness of low-carbon policies and suggests recommendations to policymakers seeking to enhance the design and implementation of LCCP, thereby contributing to the green development of enterprises and regions.
Tag: Cost of Debt
Do Sustainable Operations through Energy Effectiveness Reduce Cost of Debt in Medium and High-tech Industries? Evidence from an Emerging Economy
Access to low-cost finance is a significant factor influencing firms’ investment decisions in research and development, which is crucial for corporate success. The goal becomes critical when the firm’s sustainability policy channels energy consumption, resulting in optimal capital allocation for new, resource-efficient technologies. Despite its significant relevance in policymaking, there has been little academic study…