Finance and Accounting Research Seminar - Mengyu Wang (Singapore Management University) The Green Reallocation Paradox: Do Capital Investments Abandon Polluting Industries?

Monday, 05 October 2026 at 13:30

The Green Reallocation Paradox: Do Capital Investments Abandon Polluting Industries?

Event details

The literature proposes various mechanisms to discipline corporate pollution, but do capital investments abandon polluting industries? We document a paradox: external capital markets keep allocating capital to stand-alone firms in highly polluting industries, whereas multisector firms cut investment in pollution-intensive peripheral segments. Quasi-exogenous regulatory shocks from Clean Air Act nonattainment designations support a causal interpretation. Standard mechanisms fail to induce market-wide divestment but largely strengthen internal reallocation. These patterns are consistent with a model in which binding internal budget constraints convert environmental pressure into within-firm reallocation. Our findings highlight internal capital markets as a previously overlooked arena for green transition.

Organiser

University of Exeter Business School - Finance and Accounting

Location

Syndicate Room C (Building One)