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Pushing lenders to over-comply with environmental regulations: A developing country perspective

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  • Parashar Kulkarni

    (Centre for Development Finance, Institute for Financial Management and Research, Chennai, India)

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    Abstract

    In the past few years, the number of lenders adopting voluntary environmental codes, such as the Equator Principles, is increasing. The main reasons for this form of over-compliance include warm glow preferences of agents, credit risk and incentives arising from regulation. Empirical evidence suggests that lenders that over-comply are generally bigger than those that don't. In particular, they are likely to be MNCs. In addition, the behaviour of over-complying lenders differs from other lenders, for instance they are more likely to incorporate environmental risks in their lending practices. In the context of developing countries, incentives that promote over-compliance exist to much lesser degree. Analysing the regulatory environment in developing countries, we find no compelling reason for regulators to encourage voluntary initiatives such as the Equator Principles. Copyright © 2009 John Wiley & Sons, Ltd.

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    File URL: http://hdl.handle.net/10.1002/jid.1587
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    Bibliographic Info

    Article provided by John Wiley & Sons, Ltd. in its journal Journal of International Development.

    Volume (Year): 22 (2010)
    Issue (Month): 4 ()
    Pages: 470-482

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    Handle: RePEc:wly:jintdv:v:22:y:2010:i:4:p:470-482

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    Web page: http://www3.interscience.wiley.com/journal/5102/home

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