Financing Conditions and Toxic Emissions

65 Pages Posted: 28 Jun 2019 Last revised: 12 Jul 2019

See all articles by Martin Richard Goetz

Martin Richard Goetz

Deutsche Bundesbank - Research Centre; Leibniz Institute for Financial Research SAFE

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

Goetz, Martin Richard, Financing Conditions and Toxic Emissions (June 27, 2019). SAFE Working Paper No. 254, Available at SSRN: or

Martin Richard Goetz (Contact Author)

Deutsche Bundesbank - Research Centre ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431

Leibniz Institute for Financial Research SAFE ( email )

Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323

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