Stefanie Kleimeier

New Publication

Bank loans are an important source of finance for innovative firms, but involve moral hazard problems driven by a heightened level of information asymmetry between the borrower and lender.

In our paper "How do banks finance R&D intensive firms? the role of patents in overcoming information asymmetry" in Finance Research Letters, Arvid Hoffmann (Adelaide University) and I find that in syndicated loan arrangements, lead arrangers need to retain a larger share of the loan when an innovative borrower (i.e., R&D intensive firm) is involved, but show that patents can overcome this necessity. By retaining a larger lending share, lead arrangers signal to participant lenders their incentive to exert the necessary effort in due diligence and monitoring of borrowers with high information asymmetry. However, patents are a signal of successful outcomes of the otherwise intangible innovation process, reducing a borrower's cash flow volatility and R&D payoff uncertainty, suggesting that less due diligence and monitoring efforts are required and moral hazard is lower.

New Publication

Despite awareness of the detrimental impact of CO2 pollution on the world climate, countries vary widely in how they design and enforce environmental laws.

In our paper "Exporting Pollution: Where Do Multinational Firms Emit CO2?" in Economic Policy, Itzhak Ben-David (Ohio State University & NBER), Yeejin Jang (University of New South Wales), Michael Viehs (Federated Hermes International) and I explore how firms respond to environmental regulation.

Using novel microdata about multinational firms' CO2 emissions across countries, we document that firms headquartered in countries with strict environmental policies perform their polluting activities abroad in countries with relatively weaker policies. These effects are largely driven by tightened environmental policies in home countries that incentivize firms to pollute abroad rather than lenient foreign policies that attract those firms. Although firms headquartered in countries with strict domestic environmental policies are more likely to export pollution to foreign countries, they nevertheless emit somewhat less overall CO2 globally.

New Publication

To what extent does corporate environmental performance affect a company’s cost of capital?

Whilst institutional investors increasingly recognize that corporate environmental performance matters, there remains skepticism in how far sustainable business practices translate into immediate financial outcomes. This is, in part, driven by a lacking consensus in academic research on the relationship between corporate environmental perfor-mance and financial outcomes, including cost of capital.

In our paper "Pricing Carbon Risk: Investor Preferences or Risk Mitigation?" in Economics Letters, Michael Viehs (Federated Hermes International) and I find that companies with relatively higher carbon emissions pay higher loan spreads. Higher spreads are charged by all lenders suggesting an environmental risk premium rather than investor preferences. Risk premia are lower for companies with board-level environmental responsibility suggesting ways for companies to manage their cost of debt.