Are banks really special? Evidence from a natural experiment

Justin Hung Nguyen, Jing Shi*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review


Australia’s Kyoto Protocol ratification (KPR) in December 2007 mandates the country to reduce greenhouse gas (GHG) emissions, hence affecting firms in the highest emitting industries. We exploit the KPR as an exogenous increase in environmental risk facing the highest GHG emitters. We find that the stock market reactions to bank loan announcements significantly increase after the KPR for these emitters relative to non-emitters. The effect is stronger for borrowers with higher information asymmetry and financial constraints. The evidence suggests that banks can certify their borrowers’ environmental risk through their loan approvals, which confirms the certification role of banks.
Original languageEnglish
Article number101336
Pages (from-to)1-16
Number of pages16
JournalJournal of International Financial Markets, Institutions and Money
Publication statusAccepted/In press - 2021


  • Bank loan announcement
  • Abnormal return
  • Environmental risk

Fingerprint Dive into the research topics of 'Are banks really special? Evidence from a natural experiment'. Together they form a unique fingerprint.

Cite this