Incorporation of Environmental Risks into Corporate Financing

This study analyzes the relationship between corporate financial and environmental performance from the aspect of entrepreneurial deci-sion-making with regard to investment and financing. With the help of the shareholder value model, this study first reveals the inter-dependency between operation decision, investment decision and financing decision. This interaction between the financing decision and the corporate investment decision is regarded as the research object in this study, which is expanded in three research modules constructed. The first two modules are concerned with the incor-poration of environmental concerns in the two main external finan-cing modes: debt-financing and equity-financing. The third research module articulates the interdependency between investment and financing decisions from the aspect of entrepreneurs. Shareholder theory, Stakeholder theory, transaction cost economics, modern finan-cial theory, agency theory, slack resource theory and resource-based view of the firm are applied as arguments to explain the interaction between entrepreneurs and capital suppliers by taking corporate environmental performance into consideration.