Financing Conditions and Toxic Emissions

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.

• Publication year

  2019

• Venue

  Social Science Research Network

• Publication date

  2019-06-27

• Fields of study

  Business, Economics, Environmental Science

• Identifiers
  DOI 10.2139/SSRN.3411137
• External record

  Open on Semantic Scholar

• Source metadata

  Semantic Scholar

• Only capital-intensive pollution control activities help firms regain regulatory compliance.

  Confidence 0.94

  박진우 (dztg5apj7m) extractionAK (4715169a40) reviewKiller Whale (322360f1c1) reviewB (s683577b42) review
• The reduction in toxic emissions and the rise in pollution-control investment are stronger for firms in environmental regulation noncompliance.

  Confidence 0.92

  박진우 (dztg5apj7m) extractionAK (4715169a40) reviewKiller Whale (322360f1c1) reviewB (s683577b42) review
• Lower debt financing costs reduce toxic emissions and increase investment in emission reduction activities, with the largest response in capital-intensive pollution control activities.

  Confidence 0.97

  박진우 (dztg5apj7m) extractionAK (4715169a40) reviewKiller Whale (322360f1c1) reviewB (s683577b42) review

• capital-intensive pollution control activities

  activity

  Pollution-control investments that require substantial capital spending or fixed assets.

  Aliases: capital-intensive abatement, pollution control capital spending

  박진우 (dztg5apj7m) extractionAK (4715169a40) reviewKiller Whale (322360f1c1) reviewB (s683577b42) review
• debt financing costs

  financial measure

  The cost of borrowing debt capital faced by firms in the setting analyzed in the paper.

  Aliases: financing costs, borrowing costs

  박진우 (dztg5apj7m) extractionAK (4715169a40) reviewKiller Whale (322360f1c1) reviewB (s683577b42) review
• emission reduction activities

  activity

  Firm actions or investments intended to reduce pollution output.

  Aliases: pollution abatement activities, abatement activities

  박진우 (dztg5apj7m) extractionAK (4715169a40) reviewKiller Whale (322360f1c1) reviewB (s683577b42) review
• environmental regulation noncompliance

  regulatory status

  A firm status in which environmental regulatory requirements are not being met.

  Aliases: noncompliance, regulatory noncompliance

  박진우 (dztg5apj7m) extractionAK (4715169a40) reviewKiller Whale (322360f1c1) reviewB (s683577b42) review
• regulatory compliance

  regulatory status

  A firm status in which environmental regulatory requirements are being met.

  Aliases: compliance

  박진우 (dztg5apj7m) extractionAK (4715169a40) reviewKiller Whale (322360f1c1) reviewB (s683577b42) review
• toxic emissions

  environmental outcome

  Firm-level emissions of toxic pollutants used as the environmental outcome of interest.

  Aliases: emissions

  박진우 (dztg5apj7m) extractionAK (4715169a40) reviewKiller Whale (322360f1c1) reviewB (s683577b42) review
• unconventional monetary policy shock

  policy shock

  An exogenous monetary policy disturbance used to shift firms' borrowing conditions in the empirical design.

  Aliases: UMP shock

  박진우 (dztg5apj7m) extractionAK (4715169a40) reviewKiller Whale (322360f1c1) reviewB (s683577b42) review

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