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Eco-innovation and Corporate Cost of Debt: A Cross-Country Evidence

Lookup NU author(s): Dr Vu TrinhORCiD


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This study offers cross-country (G7) evidence that eco-innovation (or green innovation, measured by its Refinitive score and a comprehensive index) is negatively and significantly associated with the corporate cost of debt. The results are intensified for firms with more prolonged eco-innovation engagement, as reflected by the eco-innovation years. The study also uncovers that a greater eco-innovation degree facilitates firms to reduce their carbon risk, affecting creditors' lending decisions by lowering debt costs. Furthermore, the lower borrowing cost underneath higher eco-innovation are more likely to be acquired in financially undistressed and constrained businesses. Our extended analysis further shows that climate governance quality reduces the beneficial impact of eco-innovation on the firm's cost of debt. The research offers timely policy implications on eco-innovation, which constitutes an essential consideration in creditors' lending decisions, aligning with the neo-institutional theory in response to increasing global environmentrelated pressures.

Publication metadata

Author(s): Trinh VQ, Trinh HH, Nguyen TH, Phung G

Publication type: Working Paper

Publication status: Published

Journal: CRBF Working Paper Series, University of St Andrew, School of Management

Year: 2024

Pages: 1-74

Publisher: Centre for Responsible Banking & Finance, School of Management, University of St Andrews


Notes: CRBF Working Paper Series, WP Number 24-019