Climate risk concern and debt financing costs: a corporate debt pricing model with evidence from China

This paper examines how climate risk concern, measured from company-level disclosures, affects the debt financing costs of Chinese listed companies. We develop a corporate debt pricing model and test its implications empirically. The results show that company with higher climate risk concern face significantly lower debt financing costs, consistent with climate awareness mitigating information asymmetry in debt markets. This effect is stronger among companies with better governance, larger size, state ownership, and non–Big Four auditors, where informational frictions are more pronounced. At the same time, we find that corporate climate concern is more likely to mitigate debt financing costs by increasing demand among investors with ESG-oriented and reducing debt default risk. Moreover, financing constraints amplify, while capital liquidity weakens, the cost-reducing effect of climate risk concern. The findings remain robust under the XGBoost model, indicating a non-linear relationship between climate risk concern and debt financing costs.