Conference Programme
Overview and details of the sessions of this conference. Please select a date or location to show only sessions at that day or location. Please select a single session for detailed view (with abstracts and downloads if available). Note that the schedule is subject to changes.
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Daily Overview |
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Parallel Session 05: Frictions in Corporate Sustainability Location: Seminar Room 6 (Level 2) Session Chair: Theodor Cojoianu, Singapore Management University. | |
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Financial Frictions and Pollution Abatement Over the Life Cycle of Firms 1: National Tsing Hua University; 2: University of Florida; 3: National Tsing Hua University; 4: University of Manchester Using US firm-level data, we document significant differences in pollution abatement activities over the life cycle of firms. Under financial constraints, smaller and younger firms invest more in capital and engage less in pollution abatement. As they accumulate more net worth, their abatement activities accelerate, and their emission intensity decreases. Motivated by this evidence, we develop and quantify a heterogeneous firm model to study the dynamics among financial frictions, capital investment, and pollution abatement. In the model, smaller and younger firms prefer capital investment over pollution abatement because the returns from capital investment are higher than those from pollution abatement. Such low returns of abatement expenditures come from both a lack of collateralizability and an increasing return to scale of operating abatement activities. More importantly, we demonstrate that financial frictions render environmental regulation suboptimal at any level, reducing the aggregate welfare gain by 40%. Finally, we show that even without monitoring, green loan policies are considerably effective in reducing emission intensity. | |