Financial Constraints and Corporate Environmental Responsibility

54 Pages Posted: 24 Aug 2018 Last revised: 30 Jan 2019

See all articles by Martin Richard Goetz

Martin Richard Goetz

Goethe University Frankfurt - Research Center SAFE

Date Written: September 13, 2018

Abstract

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.

Keywords: Corporate Social Responsibility, Emissions, Financial Constraints, Pollution, Bond Markets

JEL Classification: G32, E52, Q52, Q53

Suggested Citation

Goetz, Martin Richard, Financial Constraints and Corporate Environmental Responsibility (September 13, 2018). SAFE Working Paper No. 241. Available at SSRN: https://ssrn.com/abstract=3230344 or http://dx.doi.org/10.2139/ssrn.3230344

Martin Richard Goetz (Contact Author)

Goethe University Frankfurt - Research Center SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

Register to save articles to
your library

Register

Paper statistics

Downloads
73
rank
308,695
Abstract Views
315
PlumX Metrics