Environmental transaction costs and speed of adjustment to target debt in European carbon emitters. (20th May 2020)

• Record Type: Journal Article
• Authors: Tascón, María T.; Castro, Paula; Fernández-Cuesta, Carmen; Castaño, Francisco J.
• Is Part Of: Journal of cleaner production. Volume 256(2020)
• Publication Date: 2020-05-20
• Subjects: Environmental transaction costs -- Financial debt -- Speed of adjustment -- European public firms; Factory and trade waste -- Management -- Periodicals; Manufactures -- Environmental aspects -- Periodicals; Déchets industriels -- Gestion -- Périodiques; Usines -- Aspect de l'environnement -- Périodiques; 628.5
• DOI: 10.1016/j.jclepro.2020.120483
• Languages: English
• ISSNs: 0959-6526

Abstract

Abstract: This study analyzes how environmental transaction costs affect the speed of adjustment to the target financial debt. By applying GMM and panel data on European listed firms over the period 2005–2015, we find that the speed of adjustment is slower for carbon emitters. These results suggest that higher transaction costs (TCs) are associated with carbon emissions. However, the effect can be avoided in some cases, such as when larger firms benefit from economies of scale for a large portion of their TCs and when high-tech firms can optimally integrate TCs into their organization. By contrast, regulated firms suffer stronger negative effects of environmental TCs on their financial performance. Highlights: The environmental strategy influences the firms' financing and capital structure. Environmental transaction costs (TC) reduce the speed of adjustment to target debt. Environmental TC have not been adequately integrated in the cost structure of firms. Larger firms and technological firms can avoid this effect. Firms under price control regulation are suffering the effect in a stronger way.