Bank Monitoring and Environmental Risk

13 Pages Posted: 21 Dec 2005

See all articles by Feng Gu

Feng Gu

State University of New York at Buffalo

Weimin Wang

Saint Louis University

Date Written: 2006-01

Abstract

Loan announcement effects for 152 Canadian companies are examined to investigate the efficiency of monitoring by banks facing lender environmental liability. Market reaction to the announcement of bank debt to environmental firms is more positive and significant than for non-environmental firms and, for firms in industries with a higher likelihood of experiencing spill events, is more positive and significant, reinforcing earlier results that establish a relationship between specific loan/borrower characteristics and announcement period excess returns and providing further evidence on the uniqueness of bank loans by demonstrating the superior ability of banks to monitor corporate borrowers exposed to environmental liability.

Suggested Citation

Gu, Feng and Wang, Weimin, Bank Monitoring and Environmental Risk (2006-01). Journal of Business Finance & Accounting, Vol. 34, Issue 1-2, pp. 389-401, January/March 2007. Available at SSRN: https://ssrn.com/abstract=857608 or http://dx.doi.org/10.1111/j.1468-5957.2006.00644.x

Feng Gu (Contact Author)

State University of New York at Buffalo ( email )

12 Capen Hall
School of Management
Buffalo, NY 14221

Weimin Wang

Saint Louis University ( email )

63103

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