Abstract
This study examines the impact of a firm's polluting activities (measured as environmental inefficiency) on the firm's bond credit rating. We posit that firms with excessive polluting activities (i.e., a high level of environmental inefficiency) receive low bond ratings because prior research links pollution reduction to better firm performance and outcomes. Using a 29-year panel sample with 4969 firm-year observations (representing 310 unique firms) from 1987 to 2015, we find a significant negative relation between environmental inefficiency and bond ratings. Our results still hold after a battery of robustness checks. In addition, we find that our results are largely driven by firms that are not near a broad bond rating change (i.e., firms without a plus or minus specification in their bond ratings).
| Original language | English |
|---|---|
| Pages (from-to) | 17-37 |
| Number of pages | 21 |
| Journal | Journal of Economics and Business |
| Volume | 101 |
| DOIs | |
| State | Published - 1 Jan 2019 |
| Externally published | Yes |
Bibliographical note
Publisher Copyright:© 2018 Elsevier Inc.
Keywords
- Bond credit ratings
- Environmental activities
- Environmental inefficiency
ASJC Scopus subject areas
- General Business, Management and Accounting
- Economics and Econometrics