IDEAS home Printed from https://ideas.repec.org/a/wsi/adrxxx/v40y2023i02ns0116110523400036.html
   My bibliography  Save this article

Climate-Related Transition Risk and Corporate Debt Financing: Evidence from Southeast Asia

Author

Listed:
  • GEMMA ESTRADA

    (Economic Research and Development Impact Department (ERDI), Asian Development Bank, Manila, Philippines)

  • RESI ONG OLIVARES

    (ERDI, Asian Development Bank, Manila, Philippines)

  • DONGHYUN PARK

    (ERDI, Asian Development Bank., Philippines)

  • SHU TIAN

    (ERDI, Asian Development Bank, Manila, Philippines)

Abstract

The Paris Agreement signals increased climate awareness and potential changes in the business environment as an economy decarbonizes. Ratification of the Paris Agreement could heighten climate-related transition risks, especially for companies in high-emitting industries. This research analyzes the impact of Paris Agreement ratification on the debt financing decisions of publicly listed companies in Southeast Asian economies. Our empirical evidence shows that, after announcement of Paris Agreement ratification, firms in high-emitting industries have leverage and financial leverage that are an average of 1.8% and 4.2% lower, respectively, than firms in low-emitting industries. Firms in the region also witnessed higher risks 2 years after ratification, and these risks do not differ significantly between high- and low-emitting industries. This finding implies that firms become riskier under heightened transition risks, and this influences their financial decisions. Governments might thus consider introducing policies that facilitate their response to a low-carbon transition.

Suggested Citation

  • Gemma Estrada & Resi Ong Olivares & Donghyun Park & Shu Tian, 2023. "Climate-Related Transition Risk and Corporate Debt Financing: Evidence from Southeast Asia," Asian Development Review (ADR), World Scientific Publishing Co. Pte. Ltd., vol. 40(02), pages 87-110, September.
    • Handle: RePEc:wsi:adrxxx:v:40:y:2023:i:02:n:s0116110523400036
    DOI: 10.1142/S0116110523400036
    as

    Download full text from publisher

    File URL: http://www.worldscientific.com/doi/abs/10.1142/S0116110523400036
    Download Restriction: Open Access
    File URL: https://libkey.io/10.1142/S0116110523400036?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Association of Southeast Asian Nations; climate-related risks; cost of debt; debt finance; leverage; Paris Agreement; transition risks;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wsi:adrxxx:v:40:y:2023:i:02:n:s0116110523400036. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tai Tone Lim (email available below). General contact details of provider: https://www.worldscientific.com/worldscinet/adr .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.