Financial constraints and corporate environmental responsibility

  • This paper analyzes the effect of financial constraints on firms' corporate social responsibility. Exploiting heterogeneity in firms' exposure to a monetary policy shock in the U.S., which reduced financial constraints for some firms, I find that firms increase their environmental responsibility. I use facility-level data to account for unobservable time-varying influences on pollution and find that toxic emissions decrease when parent companies are more exposed to the monetary policy shock. I further find that these facilities are also more likely to implement pollution abatement activities. Examining within-parent company heterogeneity I find that pollution abatement investments center on facilities at greater risk of facing additional costs due to environmental regulation. The findings are consistent with the idea that a reduction in financial constraints reduces pollution as it allows firms to implement pollution abatement measures.

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Author:Martin GötzGND
Parent Title (English):SAFE working paper series ; No. 241
Series (Serial Number):SAFE working paper series (241)
Place of publication:Frankfurt am Main
Document Type:Working Paper
Year of Completion:2019
Year of first Publication:2019
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2019/02/05
Tag:Bond Markets; Corporate Social Responsibility; Emissions; Financial Constraints; Pollution
Issue:September 13, 2018
Page Number:54
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / House of Finance (HoF)
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Wissenschaftliche Zentren und koordinierte Programme / Sustainable Architecture for Finance in Europe (SAFE)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Licence (German):License LogoDeutsches Urheberrecht