Incorporation of Environmental Risks into Corporate Financing

This study analyzes the relationship between corporatefinancial and environmental performance from the aspect ofentrepreneurial decision-making with regard to investment andfinancing. With the help of the shareholder value model, this studyfirst reveals the interdependency between operation decision,investment decision and financing decision. This interactionbetween the financing decision and the corporate investmentdecision is regarded as the research object in this study, which isexpanded in three research modules constructed. The first twomodules are concerned with the incorporation of environmentalconcerns in the two main external financing modes: debt-financingand equity-financing. The third research module articulates theinterdependency between investment and financing decisions from theaspect of entrepreneurs. Shareholder theory, Stakeholder theory,transaction cost economics, modern financial theory, agency theory,slack resource theory and resource-based view of the firm areapplied as arguments to explain the interaction betweenentrepreneurs and capital suppliers by taking corporateenvironmental performance into consideration.