NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Firm-Level Financial Resources and Environmental Spills

Jonathan Cohn, Tatyana Deryugina

NBER Working Paper No. 24516
Issued in April 2018
NBER Program(s):Corporate Finance, Environment and Energy Economics, Public Economics

Using novel US environmental spill data, we document a robust negative relationship between the number of spills a firm experiences in a given year and its contemporaneous and lagged (but not future) cash flow. In addition, studying two natural experiments, we find an increase (decrease) in spills following negative (positive) shocks to a firm's financial resources, both in absolute terms and relative to control firms. Overall, our results suggest that firms' financial resources play an important role in their ability to mitigate environmental risk.

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Document Object Identifier (DOI): 10.3386/w24516

 
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