17
B. Previous Research
This literature review tries to find out the research already conducted in this field and to what this thesis could contribute. The following researches have already been conducted in
this field:
1. Environmental Risk Management and the Cost of Capital Study on publicly-
held US firms Sharfman and Fernando, 2007 :
This research is about a study of 267 U.S. firms shows that improved environmental risk management is associated with a lower cost of capital. These findings provide an
alternative perspective on the environmental – economic performance relationship, which
has been dominated by the view that improvements in economic performance stem from better resource utilization. Firms also benefit from improved environmental risk
management through a reduction in their cost of equity capital, a shift from equity to debt financing, and higher tax benefits associated with the ability to add debt. These findings
help build better theory regarding the outcomes of strategic improvements in environmental risk management.
2. Environmental Externalities and Cost of Capital Chava, 2010
This research analyze the impact of a firm‘s environmental profile on its cost of
equity and debt capital. Using i mplied cost of capital derived from analysts‘ earnings
estimates, this research find that investors demand significantly higher expected returns on stocks excluded by environmental screens such as hazardous chemical, substantial
emissions and climate change concerns compared to firms without such environmental concerns. Lenders also charge a significantly higher interest rate on the bank loans issued
18
to firms with these environmental concerns. These provide evidence that environmental profile of a firm is not simply a proxy for an omitted component of its default risk.
Further, firms with these environmental concerns have lower institutional ownership and fewer banks participate in their loan syndicate than firms without such environmental
concerns. These results suggest that exclusionary socially responsible investing and environmentally sensitive lending and the consequent increase in the cost of equity and
debt capital has the potential to prompt firms to internalize their environmental externalities.
3. Corporate Environmental Management and Credit Risk Bauer and Hann,
Kategori