Financial constraints and corporate environmental responsibility

Category: Finance Brown Bag Seminar
When: 19 September 2018
, 14:00
 - 15:00
Where: HoF E.20 ("DZ Bank")
Speaker: Martin Götz

Authors: Martin Götz (Goethe University)

Title: Financial constraints and corporate environmental responsibility

Abstract: This paper analyzes the effect of financial constraints on firms' corporate social responsibility. Exploiting heterogeneity in  firms' exposure to a monetary policy shock in the U.S., which reduced  financial constraints for some firms, I find that  firms increase their environmental responsibility. I use facility-level data to account for unobservable time-varying influences on pollution and find that toxic emissions decrease when parent companies are more exposed to the monetary policy shock. I further  find that these facilities are also more likely to implement pollution abatement activities. Examining within-parent company heterogeneity I find that pollution abatement investments center on facilities at greater risk of facing additional costs due to environmental regulation. The findings are consistent with the idea that a reduction in financial constraints reduces pollution as it allows firms to implement pollution abatement measures.