This research focuses on the emerging Asian markets and aims to answer the following research questions: (i) How do Asian markets’ ratification of the Kyoto Protocol affect firms’ financing costs, captured by cost of debt, bond yield spread and credit rating? (ii) What market attributes may be related to firms’ exposure to such a downside risk? (iii)What might be the possible working channel passing through the risk to firms’ cost of debt? This study contributes to existing literature with new evidence on micro-level implication of international climate change agreement in emerging markets. Such findings will be useful to policy makers on a successful transition towards a sustainable development trajectory.

JEL codes: Q54, G10