Does environmental disclosure improve debt capacity and maturity? Evidence from pollution-intensive firms under weak institutional enforcement

Research background:Environmental disclosure has emerged as both a financial signal and an ethical commitment in sustainable finance. However, in emerging economies with weak institutional enforcement, it remains unclear whether environmental transparency improves debt financing outcomes. Purpose of the article: This study examines whether environmental information disclosure enhances firms’ debt capacity and debt maturity in pollution-intensive industries, where environmental risk and information asymmetry are high. Methods: The analysis uses an unbalanced panel of 212 pollution-intensive firms listed on the Dhaka Stock Exchange during 2010–2023. Firm fixed-effects regressions with year controls and firm-clustered standard errors address unobserved heterogeneity and serial correlation. To mitigate potential endogeneity, the study incorporates lagged disclosure measures and dynamic specifications as robustness checks, thereby strengthening identification and reducing reverse-causality concerns. The framework draws on Information Asymmetry Theory, Stakeholder Theory, and the Natural Resource-Based View, with weak institutional enforcement modeled as a contextual boundary condition. Findings & value added: Higher environmental disclosure significantly increases debt capacity but has no unconditional effect on debt maturity. Financial performance strengthens the positive association between disclosure and debt capacity, indicating that profitability enhances disclosure credibility. The limited maturity effect reflects conservative lending practices in weak enforcement environments, where short-term financing structures persist despite improved transparency. By analyzing environmental disclosure under weak institutional enforcement, this study contributes to the sustainable finance literature beyond a singlecountry case. Methodologically, it combines fixed-effects estimation with lag-based and dynamic approaches to reduce bidirectional bias. The findings show that disclosure reduces information risk and improves debt access, but its effectiveness depends on institutional quality and firm-level financial strength. The results generalize to bank-dominated emerging markets, where disclosure credibility is constrained by monitoring capacity and enforcement limitations. These insights inform regulators and financial institutions seeking to strengthen disclosure frameworks and integrate environmental risk into lending decisions.