Climate regulation costs and firms’ distress risk

Q1 Economics, Econometrics and Finance
Neophytos Lambertides, Dimitris Tsouknidis
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引用次数: 0

Abstract

In 2013, the European Union's Emission Trading Scheme (EU-ETS) entered Phase III. The majority of emission permits in Phase III are auctioned instead of being allocated for free as in Phases I and II. Using a difference-in-differences method, we show that this change has led to an increase in the financial distress risk of the EU-ETS-regulated firms when compared to unregulated firms, suggesting that the EU-ETS imposes a significant financial burden on regulated firms. This result is robust to an array of validation tests, alleviating concerns that it is driven by unobserved factors. In additional analyses we show that the increase in distress risk of regulated firms during Phase III can be explained by, (i) an additional climate regulation cost to purchase pollution permits and (ii) a low average environmental score that possibly (via high sustainability risk) lowers investors expectations regarding firms’ performance. Our findings also show that the distress risk increase is higher for regulated firms operating within countries with lower control of corruption, government effectiveness, political stability, regulatory quality, rule of law, and voice accountability before the EU-ETS implementation.

Abstract Image

气候监管成本与企业困境风险
2013 年,欧盟排放交易计划(EU-ETS)进入第三阶段。第三阶段的大部分排放许可证是通过拍卖获得的,而不是像第一和第二阶段那样免费分配。利用差分法,我们发现与未受管制的企业相比,这一变化导致受欧盟排放交易计划管制的企业的财务困境风险增加,表明欧盟排放交易计划给受管制的企业带来了巨大的财务负担。这一结果在一系列验证测试中都是稳健的,减轻了人们对这一结果由非观测因素驱动的担忧。在额外的分析中,我们发现受监管企业在第三阶段的困境风险增加的原因包括:(i) 购买污染许可证的额外气候监管成本;(ii) 平均环境得分较低,这可能(通过高可持续性风险)降低了投资者对企业绩效的预期。我们的研究结果还表明,在欧盟排放交易计划实施前,腐败控制、政府效率、政治稳定性、监管质量、法治和发言权问责程度较低的国家内运营的受监管企业的困境风险增加较高。
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来源期刊
Financial Markets, Institutions and Instruments
Financial Markets, Institutions and Instruments Economics, Econometrics and Finance-Economics, Econometrics and Finance (all)
CiteScore
1.80
自引率
0.00%
发文量
17
期刊介绍: Financial Markets, Institutions and Instruments bridges the gap between the academic and professional finance communities. With contributions from leading academics, as well as practitioners from organizations such as the SEC and the Federal Reserve, the journal is equally relevant to both groups. Each issue is devoted to a single topic, which is examined in depth, and a special fifth issue is published annually highlighting the most significant developments in money and banking, derivative securities, corporate finance, and fixed-income securities.
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