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Financing conditions and toxic emissions

Author

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  • Goetz, Martin

Abstract

Exploiting heterogeneity in U.S. firms' exposure to an unconventional monetary policy shock that reduced debt financing costs, I identify the impact of financing conditions on firms' toxic emissions. I find robust evidence that lower financing costs reduce toxic emissions and boost investments in emission reduction activities, especially capital-intensive pollution control activities. The effect is stronger for firms in noncompliance with environmental regulation. Examining the ability of regaining regulatory compliance by implementing pollution control activities I find that only capital-intensive activities help firms regaining compliance. These findings underscore the impact of firms' financing conditions for emissions and the environment.

Suggested Citation

  • Goetz, Martin, 2019. "Financing conditions and toxic emissions," SAFE Working Paper Series 254, Leibniz Institute for Financial Research SAFE.
    • Handle: RePEc:zbw:safewp:254
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    File URL: https://www.econstor.eu/bitstream/10419/200392/1/1669407292.pdf
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    References listed on IDEAS

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    1. Vayanos, Dimitri & Vila, Jean-Luc, 2009. "A preferred-habitat model of the term structure of interest rates," LSE Research Online Documents on Economics 29308, London School of Economics and Political Science, LSE Library.
    2. Ann Harrison & Benjamin Hyman & Leslie Martin & Shanthi Nataraj, 2015. "When do Firms Go Green? Comparing Command and Control Regulations with Price Incentives in India," NBER Working Papers 21763, National Bureau of Economic Research, Inc.
    3. Michael Greenstone, 2003. "Estimating Regulation-Induced Substitution: The Effect of the Clean Air Act on Water and Ground Pollution," American Economic Review, American Economic Association, vol. 93(2), pages 442-448, May.
    4. Ann E. Harrison & Ben Hyman & Leslie A. Martin & Shanthi Nataraj, 2015. "When do Firms Go Green? Comparing Price Incentives with Command and Control Regulations in India," Working Papers WR-1133, RAND Corporation.
    5. Robert J. Kurtzman & Stephan Luck & Thomas Zimmermann, 2017. "Did QE Lead Banks to Relax Their Lending Standards? Evidence from the Federal Reserve's LSAPs," Finance and Economics Discussion Series 2017-093, Board of Governors of the Federal Reserve System (U.S.).
    6. Janet Currie & Lucas Davis & Michael Greenstone & Reed Walker, 2015. "Environmental Health Risks and Housing Values: Evidence from 1,600 Toxic Plant Openings and Closings," American Economic Review, American Economic Association, vol. 105(2), pages 678-709, February.
    7. Stephan Luck & Thomas Zimmermann, 2018. "Employment Effects of Unconventional Monetary Policy : Evidence from QE," Finance and Economics Discussion Series 2018-071, Board of Governors of the Federal Reserve System (U.S.).
    8. Foley-Fisher, Nathan & Ramcharan, Rodney & Yu, Edison, 2016. "The impact of unconventional monetary policy on firm financing constraints: Evidence from the maturity extension program," Journal of Financial Economics, Elsevier, vol. 122(2), pages 409-429.
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    Cited by:

    1. de Haas, Ralph & Popov, Alexander, 2019. "Finance and Carbon Emissions," CEPR Discussion Papers 14012, C.E.P.R. Discussion Papers.

    More about this item

    Keywords

    Toxic emissions; Financing conditions; Bond markets; Unconventional Monetary Policy;

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling

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