Title: Carbon emission intensity, energy management practices and financial leverage: evidence from emerging Indian economy

Authors: Biswajit Ghose; Leo Themjung Makan; Kailash Chandra Kabra

Addresses: Department of Commerce, Tezpur University, Napaam, Assam – 784028, India ' Department of Commerce, North-Eastern Hill University, Shillong, Meghalaya – 793022, India ' Department of Commerce, North-Eastern Hill University, Shillong, Meghalaya – 793022, India

Abstract: This study investigates the impact of carbon emission intensity (CEI) and energy management practices on firms' financial leverage. Besides, the study also examines moderating role of energy management practices in the relationship between CEI and financial leverage. Using panel fixed effect model on a dataset of 66 listed firms over the period of five years from 2015-2016 to 2019-2020, the study finds negative impact of carbon intensity on firms' financial leverage indicating a direct association between carbon intensity and cost of debt. Further, the negative impact of carbon intensity on leverage is observed to be higher in case of firms undertaking energy management practices. The results suggest that firms should strive for decreasing the carbon footprints to take advantage of more debt in capital structure. Further, firms should strategically invest in energy management practices so that the same helps in attenuating the adverse impact of carbon intensity on leverage.

Keywords: carbon emission intensity; CEI; energy management practices; energy audit; financial leverage; capital structure; debt; panel data; fixed effect model; emerging economy; India.

DOI: 10.1504/GBER.2024.139311

Global Business and Economics Review, 2024 Vol.31 No.1, pp.23 - 43

Received: 19 Jul 2022
Accepted: 06 Jan 2023
Published online: 01 Jul 2024 *

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