Publication: Environmental Reporting Policy and Debt Maturity: Prespectives from a Developing Country
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Date
2022
Journal Title
Journal ISSN
Volume Title
Publisher
Vilnius University
Abstract
Purpose – This research investigates the impact of
environmental reporting policy based on evidence from levels of the debt
maturity structure of non-financial firms listed on Bursa Malaysia i.e. the
Malaysian Stock Exchange. In addition, further evaluation is performed
on the ability of firms to adjust to target debt maturity levels based on the
environmental disclosure policy.
Design/methodology/approach – The research is conducted in the context
of a developing country where the political and contracting costs of the
economy tend to influence financial decisions. The selection of Malaysia
as the focus of the research is based on it being characterised as a
relationship-based economy. Therefore, incentives for environmental
reporting policy would influence firms’ riskiness, perceived transparency
levels as well as the ability to access capital markets. As a consequence of
these characteristics, the research proposes a static and dynamic model in
order to investigate the motivation for voluntary environmental disclosure
based on debt maturity levels.
Findings – Empirical results from modelling the determinants of debt
maturity indicate that disclosure firms tend to opt for shorter debt maturity
structures. Non-discloser firms’ motivation for opting for longer structures
arises from potential liquidity risks. Furthermore, discloser firms are
found to have lower levels of moral hazards as well as reduced potential
for bankruptcy. Discloser firms’ motivation is further evidenced by the
reduced potential for cash shortages highlighting lower levels of volatility.
In addition, the dynamic regime switching model provides further
justification for the environmental reporting policy where voluntary
disclosers have enhanced ability to adjust to target debt maturity levels
further validating the notion of voluntary reporting which is guided by
firm riskiness and contracting costs.
Originality/value – The findings from the research provide a direct
measure of firms’ contracting costs based on environmental reporting
policy. The measurement is based on the debt maturity structure as well as
the ability to adjust to target debt maturity levels. Results take research
forward, provide insights into firms’ riskiness, liquidity as well as
motivation for adopting differing policies at firm levels.
Description
Volume: 21 No: 1 (page: 245-262)
Keywords
environmental reporting policy, debt maturity, dynamic regime-switching model, developing country.
Citation
URI
http://www.transformations.knf.vu.lt/55/article/envi
https://www.scopus.com/record/display.uri?eid=2-s2.0-85128229545&origin=resultslist&sort=plf-f&src=s&sid=3f1868111a303d5a05d758a34d75371e&sot=b&sdt=b&s=TITLE-ABS-KEY%28Environmental+Reporting+Policy+And+Debt+Maturity%3A+Prespectives+From+A+Developing+Country%29&sl=151&sessionSearchId=3f1868111a303d5a05d758a34d75371e
https://oarep.usim.edu.my/handle/123456789/10669
https://www.scopus.com/record/display.uri?eid=2-s2.0-85128229545&origin=resultslist&sort=plf-f&src=s&sid=3f1868111a303d5a05d758a34d75371e&sot=b&sdt=b&s=TITLE-ABS-KEY%28Environmental+Reporting+Policy+And+Debt+Maturity%3A+Prespectives+From+A+Developing+Country%29&sl=151&sessionSearchId=3f1868111a303d5a05d758a34d75371e
https://oarep.usim.edu.my/handle/123456789/10669