UM  > Faculty of Business Administration
Corporate Environmental Liabilities and Capital Structure
Xin Chang1; Kangkang Fu2; Tao Li3; Lewis Tam4; George Wong5
Source PublicationSSRN Electronic Journal

We investigate the capital structure implications of corporate environmental liabilities, which are captured using the amount of firms’ toxic production-related waste. We document that firms with higher environmental liabilities maintain lower financial leverage ratios, suggesting that environmental liabilities work as a substitute for financial liabilities. The substitution effect is more pronounced for larger firms, firms covered by more analysts, firms that have higher sales to principal customers, and firms with greater community concerns. Further analysis shows that less environmentally responsible firms have a lower fraction of bank debt in total debt, all else equal, consistent with the notion that banks are more environmentally sensitive than other lenders. Overall, our findings imply that being environmentally responsible can enhance firms’ debt capacity and improve the availability of bank credit.

KeywordBank Debt Corporate Social Responsibility Environmental Liability Capital Structure
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Document TypeJournal article
CollectionFaculty of Business Administration
Affiliation1.Nanyang Business School, Nanyang Technological University
2.Hong Kong Baptist University
3.Central University of Finance and Economics (CUFE) - School of Economics
4.Faculty of Business Administration, University of Macau
5.The Hong Kong Polytechnic University
Recommended Citation
GB/T 7714
Xin Chang,Kangkang Fu,Tao Li,et al. Corporate Environmental Liabilities and Capital Structure[J]. SSRN Electronic Journal,2018.
APA Xin Chang,Kangkang Fu,Tao Li,Lewis Tam,&George Wong.(2018).Corporate Environmental Liabilities and Capital Structure.SSRN Electronic Journal.
MLA Xin Chang,et al."Corporate Environmental Liabilities and Capital Structure".SSRN Electronic Journal (2018).
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