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Bank Monitoring and Environmental Risk

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  • Sebouh Aintablian
  • Patricia A. Mcgraw
  • Gordon S. Roberts

Abstract

Loan announcement effects for 152 Canadian companies are examined to investigate the efficiency of monitoring by banks facing lender environmental liability. Market reaction to the announcement of bank debt to ‘environmental’ firms is more positive and significant than for ‘non‐environmental’ firms and, for firms in industries with a higher likelihood of experiencing spill events, is more positive and significant, reinforcing earlier results that establish a relationship between specific loan/borrower characteristics and announcement period excess returns and providing further evidence on the ‘uniqueness’ of bank loans by demonstrating the superior ability of banks to monitor corporate borrowers exposed to environmental liability.

Suggested Citation

  • Sebouh Aintablian & Patricia A. Mcgraw & Gordon S. Roberts, 2007. "Bank Monitoring and Environmental Risk," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 34(1‐2), pages 389-401, January.
    • Handle: RePEc:bla:jbfnac:v:34:y:2007:i:1-2:p:389-401
    DOI: 10.1111/j.1468-5957.2006.00644.x
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    References listed on IDEAS

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