Financing Conditions and Toxic Emissions
65 Pages Posted: 28 Jun 2019 Last revised: 12 Jul 2019
Date Written: June 27, 2019
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.
Keywords: Toxic Emissions, Financing Conditions, Bond Markets, Unconventional Monetary Policy
JEL Classification: G32, E52, Q52, Q53
Suggested Citation: Suggested Citation