Switch to pollution control bonds, else carbon risk will switch us: Evidence from the U.S. electric utility firms

Khanchel, Imen; Lassoued, Naima; Khiari, Cyrine

doi:10.1016/j.heliyon.2024.e32487

Heliyon

2024

DOI: 10.1016/j.heliyon.2024.e32487

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Switch to pollution control bonds, else carbon risk will switch us: Evidence from the U.S. electric utility firms

Imen Khanchel,

Naima Lassoued,

Cyrine Khiari

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2024

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Cited by 2 publications

References 35 publications

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Carbon emissions and overinvestment are green bonds the solution?

Jebri,

Lassoued,

Khanchel

2024

Bus Strat Dev

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This study examines the effect of carbon emissions on overinvestment and investigates whether this relationship is moderated by green bond issuance. Based on a sample of 90 non‐financial American firms (45 green bond issuers and 45 matched firms) observed from 2014 to 2022, the results indicate that carbon emissions, particularly those from Scopes 1 and 2, increase overinvestment. These findings suggest that carbon emissions are associated with agency conflicts, attributable to various factors such as divergent investment horizons between managers and shareholders. Furthermore, our results show that the issuance of green bonds attenuates this impact. This finding implies that green bonds emerge as a strategic tool not only to address external challenges, such as environmental issues—particularly the increase in carbon emissions—but also to manage internal challenges, such as the problem of overinvestment. Our study contributes to the growing literature on sustainable finance and corporate governance by highlighting the dual role of green bonds in both environmental management and investment efficiency.

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Carbon emissions and overinvestment are green bonds the solution?

Jebri,

Lassoued,

Khanchel

2024

Bus Strat Dev

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Unearthing hidden agendas: carbon emissions and corporate tax strategies

Lassoued,

Souguir,

Khanchel

2024

JFRA

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Purpose This study aims to investigate the relationship between carbon risk and tax avoidance practices among American firms. Design/methodology/approach The research examines 854 American firms over the period from 2015 to 2021. A two-stage least squares regression technique with instrumental variables is used to address potential endogeneity concerns. Findings The study shows that an increase in carbon risk is associated with higher tax avoidance, particularly through Scope 1 and Scope 2 emissions. These findings are robust across various metrics used to measure carbon risk and align with the insights derived from agency theory. Research limitations/implications Although focusing on American firms provides a consistent regulatory context, it may limit the generalizability of findings to other contexts. The study’s implications suggest that policymakers and managers should consider the interplay between environmental and tax policies in their decision-making processes. Originality/value This study contributes to the literature by extending the understanding of determinants of corporate tax avoidance by introducing carbon risk as a significant factor. The results provide valuable insights for stakeholders into the evolving dynamics of corporate environmental and fiscal responsibilities.

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Switch to pollution control bonds, else carbon risk will switch us: Evidence from the U.S. electric utility firms

Cited by 2 publications

References 35 publications

Carbon emissions and overinvestment are green bonds the solution?

Carbon emissions and overinvestment are green bonds the solution?

Unearthing hidden agendas: carbon emissions and corporate tax strategies

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