University of Texas at Austin
McCombs School of Business
Austin, TX 78712
Institutional Affiliation: University of Texas at Austin
NBER Working Papers and Publications
|April 2018||Firm-Level Financial Resources and Environmental Spills|
with : w24516
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.