Do banks value the eco-friendliness of firms in their corporate lending decision? Some empirical evidence

Nandy, Monomita; Lodh, Suman

doi:10.1016/j.irfa.2012.06.008

Cited by 176 publications

(108 citation statements)

References 79 publications

Supporting

Mentioning

102

Contrasting

Order By: Relevance

“…Climate and risk management by a firm can also involve reducing or preventing its own climate-damaging activities [17,20]. This can be achieved in two ways: first, climate laws and regulations often entail threatening a firm with penalties, litigation, and stricter environmental controls if it fails to comply with such measures.…”

Section: Climate Risks Faced By Firmsmentioning

confidence: 99%

“…In turn, investors are requiring better quantitative assessments of how firms are managing climate and environmental risks and mitigating any potential damages [10][11][12][13][14][15][16]. Greater transparency concerning firms' climate risk management and performance will, therefore, increase the willingness of investors to provide long-term financing of such firms, as well as increase the rate of return on such investments [12,[18][19][20][21][22].…”

Section: Climate Risks and Firm Debtmentioning

confidence: 99%

“…Managing these regulations and operational climate threats can be significant to a firm. Evidence from 88 firms indicates that climate and environmental risk to the firm from failing to comply with regulations is most frequently associated with a large probability of major detrimental impacts, while whilst impacts of a firm's operations on the climate and environment can be catastrophic, but often have a low probability [20].…”

Section: Climate Risks and Firm Debtmentioning

confidence: 99%

“…Improved climate risk management and performance signal to financial investors that firms can sustain higher debt capacity, require less expensive debt, and warrant lower equity risk premiums. In turn, investors are requiring better quantitative assessments of how firms are managing the climate risks, mitigating the damages that arise from climate change, and incorporating these assessments in their long-term investment decisions [12,[18][19][20][21][22]. For example, 75% of 36 surveyed global financial institutions state that they monitor climate and environmental risks of transactions, and 42% account explicitly for such risks in their credit assessments [22].…”

Section: Introductionmentioning

confidence: 99%

See 3 more Smart Citations

Innovative Corporate Initiatives to Reduce Climate Risk: Lessons from East Asia

Barbier

Burgess

2017

Sustainability

View full text Add to dashboard Cite

Businesses, investors, and insurers are requiring better quantitative assessments of their exposure to climate risks and their impact on climate change. They are incorporating these assessments in their day-to-day management and long-term investment decisions. Already, there are efforts to develop international guidelines, common policies and legal frameworks for such assessments, as well as the desire to foster climate financing. We examine recent progress in East Asia and the rest of the world in setting targets, pricing policies, and other mechanisms to reduce climate risks. We develop a model that demonstrates how reduced climate risk management may lower the total cost of capital of firms, thus making them more attractive to investors. We discuss the additional policies needed to support improved climate risk management in investment decisions, private investments in climate science, technology and innovation (STI) expansion, and more widespread adoption of climate financing and principles. Central banks, financial authorities, and governments can advance this objective by creating financial incentives to support investment decision-making. This would take into account factors such as improving climate performance, establishing better climate risk management and reporting requirements to foster green STI, and developing international guidelines and common policy and legal frameworks to support better climate risk management, assessments and reporting.

show abstract

Section: Climate Risks Faced By Firmsmentioning

confidence: 99%

Section: Climate Risks and Firm Debtmentioning

confidence: 99%

Section: Climate Risks and Firm Debtmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Innovative Corporate Initiatives to Reduce Climate Risk: Lessons from East Asia

Barbier

Burgess

2017

Sustainability

View full text Add to dashboard Cite

show abstract

“…Loan maturity reflects the borrower risk (Nandy and Lodh, 2012), which is also associated with the loan spread. According to the credit quality hypothesis, lenders prefer a short maturity period for any loan as it gives them the opportunity to assess regularly the credit position of firms (Diamond, 2004).…”

Section: H2: During the Financial Crisis In China Foreign Syndicated mentioning

confidence: 99%

How Has the Global Financial Crisis Affected Syndicated Loan Terms in Emerging Markets? Evidence from China

Caporale

Lodh²,

Nandy

2015

SSRN Journal

Self Cite

View full text Add to dashboard Cite

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractThis paper examines the impact of the recent global financial crisis on the cost of debt capital (syndicated loans) in a leading emerging market, namely China, using difference-in-differences and GARCH approaches. Before the crisis China adopted banking reforms allowing entry of foreign banks and more domestic participation in the syndicated loan market. As a result, during the crisis the volume of syndicated loans grew steadily, in contrast to other countries. In addition, the amount of foreign syndicated loans decreased and average maturity increased compared to the precrisis period. Our findings provide useful information to policy makers to devise effective responses to financial crises.

show abstract

Environmental performance and bank lending: Evidence from unlisted firms

Wellalage

Kumar

2021

Bus Strat Env

View full text Add to dashboard Cite

Growing public concerns about sustainability and adopting environmentally responsible practices increase risks as well as opportunities for firms and banks. It is unclear whether being environmentally responsible matters for unlisted firms, which are significant contributors to the degradation of the environment but which are not under strict scrutiny like public listed firms. Using a sample of 3915 firms from developing economies, we investigate whether the superior environmental performance of unlisted firms leads them to better loan conditions. After controlling for endogeneity and sample selection bias, we find that firms with better environmental performance received approximately 6.4% higher loans (as a ratio of total sales) and that this effect is more prominent in small and medium firms. This finding supports an information asymmetry view of agency costs. Our results, however, show that environmental performance does not affect loan duration and collateral requirement, indicating no spillover economic effect of corporate environmental performance on loan conditions. This partially supports a new perspective of legitimacy theory in relation to the 'greenwash strategy'. Overall, our study shows that strategically engaged environmental activities that are integrated with core business objectives represent an important business strategy for firms to enhance credit access.

show abstract

Do banks value the eco-friendliness of firms in their corporate lending decision? Some empirical evidence

Cited by 176 publications

References 79 publications

Innovative Corporate Initiatives to Reduce Climate Risk: Lessons from East Asia

Innovative Corporate Initiatives to Reduce Climate Risk: Lessons from East Asia

How Has the Global Financial Crisis Affected Syndicated Loan Terms in Emerging Markets? Evidence from China

Environmental performance and bank lending: Evidence from unlisted firms

Contact Info

Product

Resources

About