Impact of mandatory environmental information disclosure on the capital cost: Evidence from listed companies in China.

Mandatory environmental information disclosure is characterized by formal environmental regulation and that the content of the disclosure promotes public participation and oversight in the environmental field. This paper studies the impact of mandatory environmental information disclosure (EID) enforcement in China on corporate capital cost using a difference-in-difference model. The results indicate that mandatory EID increases debt capital cost, but has no significant impact on equity capital cost, which differs from mainstream research that suggest EID can reduce capital cost. Mechanism tests reveal that mandatory EID raises debt capital cost by deteriorating the financial performance of enterprises. Further research finds that the mandatory EID also reduce enterprise's total debt amount and restructure debt structure by increasing short-term liability and decreasing long-term liability. In addition, the increasing effect of mandatory EID on the debt capital cost is more pronounced among non-SOE corporations, small-scale corporations and recession corporations. This study provides new empirical evidence for the impact effectiveness of mandatory EID and suggests different research views in the related field.