Bank Liquidity, Credit Supply and the Environment
70 Pages Posted: 28 Dec 2017 Last revised: 2 Feb 2018
Date Written: December 27, 2017
We evaluate the impact of the credit conditions facing corporations on their emissions of toxic air pollutants. Exploiting cross-county, cross-time shale discoveries that generated liquidity windfalls at local bank branches, we construct measures of (1) the degree to which banks in non-shale counties, i.e., counties where shale was not discovered, receive liquidity shocks through their branches in shale counties and (2) the degree to which a corporation in a non-shale county has a relationship lender that receives liquidity shocks through its branches. From both the county- and firm-level analyses, we discover that positive shocks to credit conditions reduce corporate pollution.
Keywords: Bank Liquidity Gains, Pollution, Toxic Emissions
JEL Classification: G21, Q52, Q53, Q40
Suggested Citation: Suggested Citation