Fresh Start or Fresh Water: The impact of Environmental Lender Liability

Aymeric Bellon

Working Papers from U.S. Census Bureau, Center for Economic Studies

Abstract: I study the impact of lenders’ environmental responsibility. The empirical setting exploits the U.S. Lender Liability Act of 1996, which reduced lenders’ exposure to the environmental clean-up costs attached to some of their debtors’ collateral, and employs difference-indifferences specifications estimated using EPA and U.S. Census microdata. Firms whose lenders face lower environmental liability risks increase pollution, reduce investment in abatement technologies by 14.7%, while experiencing small production and employment distortions. Lenders facing higher liability risks offer loans with less favorable pricing, thus financially incentivizing firms to become more environmentally responsible, and potentially monitor borrowers via shorter debt maturity.

Keywords: Environmental Lender Liability Risks; Pollution; Corporate Finance; Sustainable Finance; CERCLA; Secured Debt; Debt Structure; Environmental Regulation (search for similar items in EconPapers)
JEL-codes: D22 G21 K32 Q58 (search for similar items in EconPapers)
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https://www2.census.gov/library/working-papers/2026/adrm/ces/CES-WP-26-05.pdf First version, 2026 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:cen:wpaper:26-05

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