Wednesday, June 5, 2024
Hoover Institution | Stanford University
Ross Levine, Hoover Institution senior fellow and former chaired professor at the University of California-Berkeley, discussed “Environmental Liabilities, Borrowing Costs, and Pollution Prevention Activities: The Nationwide Impact of the Apex Oil Ruling,” a paper with Jianqiang Chen (National Tsing Hua University), Pei-Fang Hsieh (National Tsing Hua University), and Po- Hsuan Hsu (National Tsing Hua University).
PARTICIPANTS
Ross Levine, John Taylor, Annelise Anderson, Terry Anderson, Michael Boskin, Steven Davis, Dixon Doll, Andy Filardo, Paul Gregory, Patrick Kehoe, Dan Kessler, Christian Kontz, David Laidler, David Malpass, Michael Melvin, Roger Mertz, Dinsha Mistree, Radek Paluszynski, Valerie Ramey, Josh Rauh, Paola Sapiensa, Richard Sousa, Jack Tatom, Victor Valcarcel
ISSUES DISCUSSED
Ross Levine, Hoover Institution senior fellow and former chaired professor at the University of California-Berkeley, discussed “Environmental Liabilities, Borrowing Costs, and Pollution Prevention Activities: The Nationwide Impact of the Apex Oil Ruling,” a paper with Jianqiang Chen (National Tsing Hua University), Pei-Fang Hsieh (National Tsing Hua University), and Po-Hsuan Hsu (National Tsing Hua University).
John Taylor, the Mary and Robert Raymond Professor of Economics at Stanford University and the George P. Shultz Senior Fellow in Economics at the Hoover Institution, was the moderator.
PAPER SUMMARY
The 2008 Apex Oil court decision reduced the circumstances under which specific environmental cleanup obligations were dischargeable in Chapter 11, potentially affecting the securities prices, credit conditions, and pollution practices of corporations not in Chapter 11. We discover that among financially stressed firms with those specific environmental liabilities, bond, and stock prices dropped after Apex. Moreover, those firms (1) experienced a tightening of credit conditions (e.g., paying higher risk premia on debts and receiving lower bond ratings), (2) intensified pollution prevention activities, and (3) reduced the emissions of pollutants causing environmental damages no longer dischargeable in Chapter 11. These findings hold among firms nationwide, not only those within the jurisdiction of the Seventh Circuit court, which issued the Apex decision, suggesting that Apex had a nationwide impact.
To read the paper click the following link
https://www.hoover.org/sites/default/files/2024-06/Apex_14March_2024%5B36%5D.pdf
To read the slides, click the following link
https://www.hoover.org/sites/default/files/2024-06/Levine-EPWG-5JUNE2024-v2.pdf
