Financial Constraints and Corporate Environmental Policies

Taehyun Kim, Qiping Xu

Research output: Working paper

Abstract

We show that financial constraints affect corporate environmental policies because of significant abatement costs associated with hazardous waste management. Exploiting several experiments in which firms' internal resources are likely exogenously impacted, we find that relaxation of financial constraints reduces firms' toxic releases. The impact on toxic releases is amplified by weaker regulatory monitoring and enforcement, by myopic managers with short horizons, and when managers are under pressure to meet earnings targets. Overall, our evidence highlights the real effects of financial constraints in the form of environmental pollution.
Original languageEnglish (US)
Number of pages53
DOIs
StatePublished - Aug 30 2017
Externally publishedYes

Publication series

NameHKUST Finance Symposium 2017

Keywords

  • Financial Constraints
  • Corporate Environmental Policies

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