CARBON DISCLOSURE AND THE COST OF DEBT: EVIDENCE FROM VIETNAM AS AN EMERGING MARKET

Abstract

This study examines the relationship between carbon disclosure and firms’ cost of debt in an emerging market context, with a focus on the role of institutional conditions and econometric methodology. Using panel data from Vietnamese listed firms over the period 2017–2024, the analysis employs multiple estimation techniques, including pooled ordinary least squares, fixed effects, and fixed effects with Driscoll–Kraay standard errors, which are robust to cross-sectional dependence. The results indicate that the relationship between carbon disclosure and borrowing costs is sensitive to estimation methods. While the FGLS robustness check suggests a negative association, this relationship is not statistically significant when cross-sectional dependence is properly addressed. The preferred specification therefore provides no robust empirical evidence that carbon disclosure is systematically associated with the cost of debt in the examined market. These findings suggest that carbon disclosure is not yet consistently reflected in debt pricing within this context. This may be explained by institutional characteristics of emerging markets, where disclosure practices are often compliance-driven and may lack credibility and decision usefulness. The study contributes to the literature by providing evidence from an emerging market and by highlighting the methodological sensitivity of carbon disclosure and cost of debt relationships. The results underscore the importance of using robust econometric techniques when examining the financial implications of carbon disclosure.