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Carbon emissions and credit ratings

Author

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  • Safiullah, Md
  • Kabir, Md. Nurul
  • Miah, Mohammad Dulal

Abstract

We examine the impact of firm-level carbon emissions on credit ratings, drawing on a sample of 3116 firm-year observations over the period 2004–2018 in the context of U.S. We find a negative, economically meaningful impact of carbon emissions on credit ratings. This finding remains robust when we employ the instrumental variable approach, difference-in-differences approach, and propensity score matching estimates to address potential endogeneity concerns. Our channel analysis reveals that firms that emit high carbon face higher cash flow uncertainty, which in turn, results in lower credit ratings.

Suggested Citation

  • Safiullah, Md & Kabir, Md. Nurul & Miah, Mohammad Dulal, 2021. "Carbon emissions and credit ratings," Energy Economics, Elsevier, vol. 100(C).
    • Handle: RePEc:eee:eneeco:v:100:y:2021:i:c:s014098832100236x
    DOI: 10.1016/j.eneco.2021.105330
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    More about this item

    Keywords

    Carbon emissions; Credit ratings; Climate change; Cashflow uncertainty;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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