Do Lenders Price the Brown Factor in Car Loans? Evidence from Diesel Cars

39 Pages Posted: 12 Oct 2022 Last revised: 14 Oct 2022

See all articles by Winta Beyene

Winta Beyene

University of Zurich - Department of Banking and Finance; Swiss Finance Institute

Matteo Falagiarda

European Central Bank (ECB)

Steven Ongena

University of Zurich - Department of Banking and Finance; Swiss Finance Institute; KU Leuven; NTNU Business School; Centre for Economic Policy Research (CEPR)

Alessandro Scopelliti

KU Leuven, Department Accounting, Finance and Insurance; University of Zurich - Department of Banking and Finance

Date Written: October 10, 2022

Abstract

The transition to a green economy strongly depends on the existence of appropriate economic incentives for agents. The loan market for car purchases is a paradigmatic example in this respect, as lenders may set credit conditions which may discourage or support the purchase of high emission vehicles. Using car loan-level data we study whether banks adjust their lending terms and conditions in response to different shocks to the perceived environmental quality of diesel vehicles. Focusing on the impact of the diesel emissions scandal in the automobile sector in 2015 and on local policy changes regarding circulation restrictions due to air pollution, we find that bank lending particularly by captive banks may further reinforce the market and regulatory failures that led to extensive levels of pollution by the automobile sector.

Suggested Citation

Beyene, Winta and Falagiarda, Matteo and Ongena, Steven R. G. and Scopelliti, Alessandro, Do Lenders Price the Brown Factor in Car Loans? Evidence from Diesel Cars (October 10, 2022). Swiss Finance Institute Research Paper No. 22-76, Available at SSRN: https://ssrn.com/abstract=4245777 or http://dx.doi.org/10.2139/ssrn.4245777

Winta Beyene

University of Zurich - Department of Banking and Finance

Plattenstr 14
Zürich, 8032
Switzerland

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

Matteo Falagiarda

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Steven R. G. Ongena (Contact Author)

University of Zurich - Department of Banking and Finance ( email )

Schönberggasse 1
Zürich, 8001
Switzerland

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant 3000
Belgium

NTNU Business School ( email )

Norway

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Alessandro Scopelliti

KU Leuven, Department Accounting, Finance and Insurance ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

University of Zurich - Department of Banking and Finance ( email )

Schönberggasse 1
Zürich, 8001
Switzerland

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