Carbon disclosure, emission levels, and the cost of debt

In this paper, we investigate the effect of voluntary carbon emissions disclosure on the cost of debt of publicly listed firms. Using a unique and comprehensive database on carbon emissions from CDP (formerly ‘The Carbon Disclosure Project’), we study whether firms which choose to voluntarily disclose their carbon emissions enjoy more favorable lending conditions - in the form of lower spreads on their bank loans - than their non-disclosing counterparts. Our empirical results reveal a significant and negative relation between voluntarily disclosing carbon emission levels and the cost of bank loans for informationally opaque borrowers. Furthermore, we find that higher industry- and firm-size-adjusted carbon emissions have a positive and significant effect on loan spreads. These effects are common to all loans and not limited to loans which have been arranged by norms-constrained lenders suggesting that spread premia are driven by environmental risks rather than investor preferences

Deposit insurance in times of crises : safe haven or regulatory arbitrage?

This paper examines the impact of deposit insurance (DI) schemes on bilateral cross-border deposits. Our results suggest that not only the existence of explicit DI, but also DI design features, which reflect its credibility have an impact on cross-border deposits, and that the relative differences between reporting and depositor countries also matter. More importantly, in times of crises, depositors rely more on DI in general, but DI acts primarily as a "Safe Haven" rather than enabling "Regulatory Arbitrage". During the global financial crisis of 2008/09 the emergency actions of bank country governments, which supply and maintain these safe havens, have led to substantial relocations of cross-border deposits