Presentation date: 13:10-15:00, December 14th, 2022
Presentation room: 4F03 (Fintech and Green Finance Center)
Speaker: Chi-Yang Tsou
https://sites.google.com/view/chiyangtsou/home
Assistant professor
Division of Accounting and Finance
Alliance Manchester Business School
University of Manchester
Title:
Pollution Abatement Investment under Financial Frictions and Policy Uncertainty
Abstract:
This paper examines how firms' investments in pollution abatement are influenced by financial frictions and policy uncertainty. Our data analyses suggest that financially constrained firms are less likely to invest in pollution abatement and are more likely to release toxic pollutants. Such a pattern is intensified by policy uncertainty measured by close gubernatorial elections. We then develop a heterogeneous firm model in which financially constrained firms to face increased shadow costs of finance from pollution abatement. This relation is further amplified by policy uncertainty for environmental regulation, which further reduces firms' incentives with respect to pollution prevention. Our empirical evidence and model suggest that the effectiveness of environmental policies is subject to corporate financial frictions and policy uncertainty.