No abstract

Over time, investors have become increasingly aware of the risks associated with a transition to a low-carbon economy. This study investigates the association between carbon emissions and the cost of debt financing for a sample of firms from the eurozone in the period 2010-2018. The results provide evidence that the risk premium required by lenders increases with carbon emissions. However, although the most polluting sectors were already charged before the Paris Agreement, and not further penalised in the subsequent period, our results indicate that the less polluting sectors started being charged a higher spread for their emissions only in the period after the Agreement. The Paris Agreement appears to be a turning point around which lenders have become aware of the strong commitment taken by policymakers in fighting climate change. Our findings also suggest that increased levels of disclosure on climate-related issues can mitigate corporate carbon risk. On the other hand, the results are not compelling when we consider the effect of control mechanisms, such as external verification for emissions, board oversight of carbon risk and the presence of emission reduction targets, on the cost of debt. Taken as a whole, the results demonstrate the effectiveness of public policies in driving lenders' allocation decisions as well as the role of climate-related disclosure in mitigating the corporate cost of capital. As such, our findings have important implications for both policymaking in environmental regulation and managerial strategies.

In this paper, we discuss IFRS 13 Fair Value Measurement with regard to private equity valuation. We raise issues on the fair value definition as an exit price and question the reliability of valuation techniques, which are categorised into Level 2 fair value hierarchy. Our paper questions whether fair value as defined by IFRS 13 is an appropriate measure for private equities and can contribute to enhancing transparency and comparability in financial statements, which is one of the purposes of the International Accounting Standards Board and the European Union Regulation 1606/2002. IFRS 13 is not contrary to the principle of 'true and fair view . . . and meets the criteria of understandability, relevance, reliability and comparability required of the financial information needed for making economic decision and assessing the stewardship of management.

No abstract