Fracking Disclosure, Collateral Value, and the Mortgage Market

This paper examines whether laws requiring oil and gas firms to disclose the chemicals used in their fracking operations affect the mortgage lending activity for properties located in nearby areas. I hypothesize and find that the disclosure mandate reduces uncertainty about the value of housing coll...

Full description

Saved in:
Bibliographic Details
Published in:The Accounting review 2022-09, Vol.97 (5), p.427-454
Main Author: Sinha, Kirti
Format: Article
Language:English
Subjects:
Collaterals
Disclosure
Drinking water
Housing
Hydraulic fracturing
Mortgages
Petroleum
Petroleum industry
Uncertainty
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:This paper examines whether laws requiring oil and gas firms to disclose the chemicals used in their fracking operations affect the mortgage lending activity for properties located in nearby areas. I hypothesize and find that the disclosure mandate reduces uncertainty about the value of housing collateral and subsequently increases (1) the probability of obtaining a mortgage by 2.5 percentage points (pp), and (2) loan-to-value by 2.2 pp. My main analyses exploit the variation in the location of properties relative to fracking wells. Cross-sectional tests that exploit heterogeneity in drinking water sources and the content of firm disclosures further substantiate my inferences and mitigate endogeneity concerns. These findings suggest that disclosure regulation for oil and gas firms affects housing collateral values, thereby impacting the mortgage market. JEL Classifications: G14; G21; G32; G38; K22; L71; M41; M48.
ISSN:0001-4826
1558-7967
DOI:10.2308/TAR-2020-0119