This paper examines whether and how public environmental enforcement affects private lenders’ monitoring efforts and the effectiveness of such monitoring. We capture lender monitoring using environmental covenants in loan agreements. Consistent with the prediction that stringent public environmental enforcement increases lenders’ monitoring incentives, we find that in the presence of higher environmental regulatory enforcement intensity, lenders are more likely to use environmental covenants when lending to polluting borrowers and when the loans are secured by real property collateral. Moreover, consistent with the prediction that stringent public environmental enforcement facilitates lender monitoring, we find that environmental covenants are more effective in reducing borrowers’ toxic chemical releases when environmental regulatory enforcement is stronger. Taken together, our findings corroborate the importance of public environmental enforcement in inducing lenders’ monitoring efforts, as well as the joint role of public enforcement and private lender monitoring in curbing corporate pollution.

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公共环境执法和私人贷款机构监控：来自环境契约的证据

本文探讨了公共环境执法是否以及如何影响私人贷款机构的监管工作以及此类监管的有效性。我们利用贷款协议中的环境契约来捕获贷款人的监控。与严格的公共环境执法会增加贷款人的监管激励的预测相一致，我们发现，在环境监管执法强度较高的情况下，贷款人在向污染借款人放贷时以及当贷款以不动产作为担保时更有可能使用环境契约抵押品。此外，与严格的公共环境执法有利于贷款人监控的预测相一致，我们发现，当环境监管执法力度更强时，环境契约在减少借款人有毒化学品排放方面更有效。总而言之，我们的研究结果证实了公共环境执法在引导贷款人监督工作方面的重要性，以及公共执法和私人贷款人监督在遏制企业污染方面的共同作用。