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

The chapter delves into the intricate relationship between environmental information disclosure quality, institutional pressures, and the cost of debt for heavy polluters in China. It begins by highlighting China's environmental challenges and the increasing pressure for sustainable growth. The study focuses on how the quality of environmental disclosures affects the cost of debt for heavy polluters, with a particular emphasis on the moderating effects of coercive, normative, and mimetic institutional pressures. The research is based on a sample of heavy-polluting firms listed on the Shanghai and Shenzhen stock exchanges from 2012 to 2019. The study finds that high-quality environmental disclosures significantly reduce the cost of debt, and that normative pressures have the strongest moderating effect on this relationship. Additionally, the chapter explores the distinct impacts of 'soft' and 'hard' environmental disclosures on the cost of debt. The findings suggest that both types of disclosures are negatively associated with the cost of debt, but 'hard' disclosures may provide a more significant competitive advantage. The chapter concludes by emphasizing the need for policymakers to encourage greater 'hard' environmental disclosures to improve the efficiency of the loan market in pricing environmental risks.