Environmental Information Disclosure Quality, Institutional Pressure, and the Cost of Debt: Evidence from China’s Heavy Polluters

We examine the impact of firm environmental information disclosure (EID) quality on firm cost of debt using a sample of heavy-polluting firms listed on the Shanghai and Shenzhen Stock Exchanges. Our findings suggest that better EID quality may effectively lower the cost of debt for heavy polluters. Institutional pressure, especially from the normative perspective, may moderate the impact. Policy implications from our findings suggest that regulators may need to tighten the rules on firm EID, focusing on more verifiable quantitative EID measures, to allow the loan market to efficiently price firm environmental risk.