Environmental Violation and Cost of Equity Capital—Evidence From Europe

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dc.citation.volumeEarly View
dc.contributor.authorBhuiyan MBU
dc.contributor.authorMan Y
dc.date.accessioned2025-05-16T02:54:14Z
dc.date.available2025-05-16T02:54:14Z
dc.date.issued2025-05-01
dc.description.abstractWe examine the association between environmental violations and the cost of equity capital. We posit that firms that breach environmental compliance introduce firm-specific risks and, consequently, elevate the costs associated with equity capital. Utilizing a dataset comprising publicly listed firms from the Bloomberg European 500 index spanning the period from 2005 to 2020, we present empirical evidence that environmental violations contribute to an increase in a firm's cost of equity capital. Our findings hold economic significance, revealing that a one standard deviation increase in environmental violations results in a 4.28–5.12 basis point increase in the cost of equity. Furthermore, we establish that the positive relationship between environmental violations and the cost of equity capital is more pronounced in firms lacking corporate social responsibility training and those operating within highly competitive industries. Importantly, our results withstand endogeneity concerns, affirming their robustness. The implications of our study extend to stakeholders, enhancing their understanding of the repercussions of environmental violations on investment decisions.
dc.description.confidentialfalse
dc.format.pagination1-31
dc.identifier.citationBhuiyan M, Man Y. (2025). Environmental Violation and Cost of Equity Capital—Evidence From Europe. Business Strategy and the Environment. Early View. (pp. 1-31).
dc.identifier.doi10.1002/bse.4315
dc.identifier.eissn1099-0836
dc.identifier.elements-typejournal-article
dc.identifier.issn0964-4733
dc.identifier.urihttps://mro.massey.ac.nz/handle/10179/72904
dc.languageEnglish
dc.publisherERP Environment and John Wiley and Sons Ltd
dc.publisher.urihttps://onlinelibrary.wiley.com/doi/10.1002/bse.4315
dc.relation.isPartOfBusiness Strategy and the Environment
dc.rights(c) 2025 The Author/s
dc.rightsCC BY 4.0
dc.rights.urihttps://creativecommons.org/licenses/by/4.0/
dc.subjectcost of equity capital
dc.subjectenvironmental violation
dc.subjectEurope
dc.subjectreputation
dc.titleEnvironmental Violation and Cost of Equity Capital—Evidence From Europe
dc.typeJournal article
pubs.elements-id500652
pubs.organisational-groupOther
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