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Environmental Penalties and Financing Punishment: Evidence from Incremental Bank Loans

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  • Xiaoyan Chen
  • Xiaobei Huang
  • Han Yan

Abstract

This study examines the impact of environmental penalties on corporate incremental bank loans. The results show that both the frequency and degree of environmental penalties significantly reduce corporate incremental bank loans, indicating that corporate environmental penalties lead to “financing punishment” by damaging corporate reputation and increasing risks. This financing punishment can be alleviated by good CSR performance and CSR assurance, indicating that exemplary CSR performance and assurance can provide an “insurance” effect to influence bank loans when a firm has a negative event. We also find that this financing punishment has intra-industry peer effects, suggesting that the environmental penalties incurred by one firm can influence the broader credit decisions of commercial banks within the same industry.

Suggested Citation

  • Xiaoyan Chen & Xiaobei Huang & Han Yan, 2025. "Environmental Penalties and Financing Punishment: Evidence from Incremental Bank Loans," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 61(1), pages 94-109, January.
    • Handle: RePEc:mes:emfitr:v:61:y:2025:i:1:p:94-109
    DOI: 10.1080/1540496X.2024.2377994
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