Is Environmental Performance a Determinant of Bond Pricing? Evidence from the US Pulp and Paper and Chemical Industries

• 成果类型: Article
• 署名作者: Schneider, Thomas E.
• 署名单位: University of Alberta
• 刊物名称: CONTEMPORARY ACCOUNTING RESEARCH
• ISSN/ISSBN: 0823-9150
• DOI: 10.1111/j.1911-3846.2010.01064.x
• 发表日期: 2011
• 页码: 1537-+
• 关键词: CORPORATE YIELD SPREADS; market valuation; liabilities; management; cost; RISK

摘要

In order to provide evidence as to whether environmental performance significantly affects bond pricing, this paper explores a cross-section of firms in two industries where it is expected that ongoing environmental performance will play a role in future financial performance. I present evidence that a firm's environmental performance is a significant determinant of its bond prices. However, as bond quality increases, environmental performance fades as a determinant of bond pricing, and for high-quality bonds this effect does not exist at all. This is consistent with the nonlinear payoff structure of bonds, whereby idiosyncratic risk becomes less of a factor in bond pricing as a firm's credit quality increases. The results imply that, while a firm has sufficient resources to cover any future environmental compliance or cleanup costs, bondholders are relatively unconcerned (from a pricing perspective) about a firm's environmental performance. However, as credit quality decreases, it becomes increasingly probable that poor environmental performance will lead to an inability to meet future debt servicing requirements and, in the extreme, to bankruptcy.