IDEAS home Printed from https://ideas.repec.org/a/kap/jbuset/v200y2025i4d10.1007_s10551-024-05907-5.html
   My bibliography  Save this article

Does Traditional Debt Financing Hurt the Environment? Evidence from Toxic Releases

Author

Listed:
  • Xiaoyi Lyu

    (Sun Yat-sen University
    Shanghai University of Finance and Economics
    University of Illinois Urbana-Champaign)

  • Chenyu Shan

    (Shanghai University of Finance and Economics
    Shanghai University of Finance and Economics)

  • Dragon Yongjun Tang

    (University of Hong Kong)

Abstract

The sources of financing for a firm can influence its environmental ethics. This study shows that traditional debt financing is associated with more pollution. Specifically, after issuing debt, firms tend to increase not only their total pollution level but also their pollution intensity. The debt‒pollution link cannot be fully explained by the production effect. This effect is more pronounced when the firm borrows for short-term purposes, has managerial short-termism, or has more risk-taking behavior. The environmental awareness of the public can weaken the debt effect. Our findings support the notion that traditional debt financing can exacerbate short-termism in firm operations, leading to a sacrifice of long-term investments that may yield future benefits. Our study suggests that green financing, such as green bonds or green loans, could help improve corporate ethical behavior.

Suggested Citation

  • Xiaoyi Lyu & Chenyu Shan & Dragon Yongjun Tang, 2025. "Does Traditional Debt Financing Hurt the Environment? Evidence from Toxic Releases," Journal of Business Ethics, Springer, vol. 200(4), pages 957-985, September.
    • Handle: RePEc:kap:jbuset:v:200:y:2025:i:4:d:10.1007_s10551-024-05907-5
    DOI: 10.1007/s10551-024-05907-5
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10551-024-05907-5
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s10551-024-05907-5?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:jbuset:v:200:y:2025:i:4:d:10.1007_s10551-024-05907-5. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.