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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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    1. Khan, M. & Matsusaka, J.G., 1995. "Demand for Environment Goods: Evidence from Voting Patterns on California Initiatives," Discussion Papers 1995_08, Columbia University, Department of Economics.
    2. Forest L. Reinhardt & Robert N. Stavins & Richard H. K. Vietor, 2008. "Corporate Social Responsibility Through an Economic Lens," NBER Working Papers 13989, National Bureau of Economic Research, Inc.
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    7. Gregory Elliehausen, 1998. "The cost of banking regulation: a review of the evidence," Staff Studies 171, Board of Governors of the Federal Reserve System (U.S.).
    8. Anna Alberini & Kathleen Segerson, 2002. "Assessing Voluntary Programs to Improve Environmental Quality," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 22(1), pages 157-184, June.
    9. John W. Maxwell & Thomas P Lyon & Steven C.. Hackett, 1995. "Self-Regulation and Social Welfare: The Political Economy of Corporate Environmentalism," University of Chicago - George G. Stigler Center for Study of Economy and State 122, Chicago - Center for Study of Economy and State.
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