6 | CONCLUSIONS
Based on empirical data from China's Shanghai and Shenzhen A‐share listed firms operating in high‐carbon industries from 2011 to 2015, we use the double fixed effects model to evaluate the relationship between carbon risk and the cost of debt financing and the moderating effect of positive media attention on this relationship. The results indicate that: (i) there is a U‐shaped relationship between carbon risk and the cost of debt financing, and this relationship is mainly embodied in private firms; (ii) as an important external corporate governance mechanism, positive media attention can negatively moderate the relationship between carbon risk and the cost of debt financing; and (iii) the moderating effect of positive media attention varies with the ownership of the firms. The cost of debt financing is more sensitive to carbon risk and more tolerant in private firms with high positive media attention than in general private firms. Our study has several contributions:
1. We investigate the effect of carbon risk on the cost of corporate debt financing in the context of China's carbon regulatory policies. The empirical settings of previous studies mainly focused on advanced capital markets. We, for the first time, study this relationship in the Chinese context. Meanwhile, considering our particular institutional environment, we evaluate the effect of carbon risk on the cost of debt financing and analyze the mechanism underlying the different ranges of the U‐shaped curve.
2. Our study complements the literature on the effect of carbon transparency on the cost of debt financing. Carbon transparency mainly includes two dimensions: corporate reporting and information dissemination (Gupta & Mason, 2016). Company reporting mainly refers to the disclosure of carbon information through annual reports, social responsibility reports, environmental reports and sustainability reports (Depoers, Jeanjean, & Jérôme, 2016; Matisoff, 2013), and information dissemination is dominated by positive media coverage (Deboskey & Gillett, 2013). Most existing studies focus on the effect of carbon disclosure on the cost of debt financing, emphasizing the importance of voluntary carbon disclosure in reducing the corporate cost of debt financing (He, Tang, & Wang, 2014; Kleimeier & Viehs, 2016). We go beyond that and investigate the effect of the information dissemination mechanism on the relationship between carbon risk and the cost of debt financing.
