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Fresh Start or Fresh Water: The impact of Environmental Lender Liability

Author

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  • Aymeric Bellon

Abstract

I study the impact of lenders’ environmental responsibility. The empirical setting exploits the U.S. Lender Liability Act of 1996, which reduced lenders’ exposure to the environmental clean-up costs attached to some of their debtors’ collateral, and employs difference-indifferences specifications estimated using EPA and U.S. Census microdata. Firms whose lenders face lower environmental liability risks increase pollution, reduce investment in abatement technologies by 14.7%, while experiencing small production and employment distortions. Lenders facing higher liability risks offer loans with less favorable pricing, thus financially incentivizing firms to become more environmentally responsible, and potentially monitor borrowers via shorter debt maturity.

Suggested Citation

  • Aymeric Bellon, 2026. "Fresh Start or Fresh Water: The impact of Environmental Lender Liability," Working Papers 26-05, Center for Economic Studies, U.S. Census Bureau.
    • Handle: RePEc:cen:wpaper:26-05
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    File URL: https://www2.census.gov/library/working-papers/2026/adrm/ces/CES-WP-26-05.pdf
    File Function: First version, 2026
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    Keywords

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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • K32 - Law and Economics - - Other Substantive Areas of Law - - - Energy, Environmental, Health, and Safety Law
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis

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