Corporate Green Revenue and Syndicated Loan Pricing

59 Pages Posted: 30 Nov 2023 Last revised: 28 Oct 2024

See all articles by Jiali Yan

Jiali Yan

University of Exeter Business School

Junyang Yin

Heriot-Watt University

Date Written: October 30, 2023

Abstract

How do banks contribute to the green economy? Using a unique dataset detailing firms’ revenue exposure to green business activities, we present new evidence that banks demand lower spreads on syndicated loans to firms generating revenues from green products and services. We find evidence consistent with a causal relation by exploiting mandatory ESG disclosure regulations as plausibly exogenous shocks. We find that the green-revenue effects on loan spreads are attributable to firms’ prospects tied to climate change-related opportunities and banks’ environmental orientations. Moreover, we find suggestive evidence that firms with green revenues tend to file more green patents following loan originations. Interestingly, while banks typically perceive green innovations as riskier and demand higher loan spreads, this effect is offset if a firm also generates green revenues. Collectively, our results highlight the pivotal role that banks play in channeling financial resources towards green business practices.

Keywords: Green revenue, loan spread, green economy, ESG disclosure regulations

JEL Classification: G21, G38, Q52, Q55, Q58

Suggested Citation

Yan, Jiali and Yin, Junyang, Corporate Green Revenue and Syndicated Loan Pricing (October 30, 2023). Available at SSRN: https://ssrn.com/abstract=4618086 or http://dx.doi.org/10.2139/ssrn.4618086

Jiali Yan (Contact Author)

University of Exeter Business School ( email )

Streatham Court
Xfi Building, Rennes Dr.
Exeter, EX4 4JH
United Kingdom

Junyang Yin

Heriot-Watt University ( email )

Riccarton
Edinburgh EH14 4AS, Scotland EH14 1AS
United Kingdom

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