Grantee Research Project Results
2006 Progress Report: The Effects of Financial Distress, Organizational Structure, and Auditing Rules on Firm Emissions
EPA Grant Number: R832847Title: The Effects of Financial Distress, Organizational Structure, and Auditing Rules on Firm Emissions
Investigators: Evans, Mary F. , McKee, Michael , Vossler, Christian , Gilpatric, Scott
Institution: University of Tennessee
EPA Project Officer: Hahn, Intaek
Project Period: April 17, 2006 through April 19, 2009
Project Period Covered by this Report: April 17, 2006 through April 19, 2007
Project Amount: $299,872
RFA: Environmental Behavior and Decisionmaking: Determining the Effectiveness of Environmental Information Disclosure and Provision (2005) RFA Text | Recipients Lists
Research Category: Environmental Justice
Objective:
Our research is investigating the design and effectiveness of Federal environmental information disclosure programs, such as the Toxic Release Inventory and the Fuel Economy Information Program, that require firms to report on their environmental performance. A key factor determining the effectiveness of such programs in reducing environmental damages is the timely and accurate reporting of environmental performance. Such information introduces market pressures as an inducement to improve environmental performance and also allows averting behavior to mitigate some of the potential adverse effects of toxic releases.
Through theoretical and empirical research, the results of this project will help us to understand (1) the effect of a firm’s organizational structure and financial status on the accuracy of reported environmental behavior and (2) the effect of the design of enforcement programs on compliance with environmental programs.
Progress Summary:
In the first year of this project, the focus has been on establishing several of the theoretical propositions outlined in our proposal and designing laboratory market experiments to test these theoretical propositions.
The team has produced one paper that is forthcoming as a chapter in an edited (and refereed) volume, two papers under review at journals, and two much more preliminary draft papers. The papers are listed below.
Our results to date can be briefly summarized. Our theoretical investigations suggest that the propensity to engage in environmental malfeasance (i.e., to emit and fail to report the emission event) is, in fact, likely to be affected by the organizational structure and compensation mechanisms adopted by the firm. Specifically, firms that rely on rank order contests to determine major shares of compensation of the divisional leaders are more likely to evade their emission reporting requirements and under-report. The propensity toward environmental malfeasance increases as the spread between the winner’s payoff and the next highest payoff increases, but can be reduced through audits and penalties.
Journal Articles on this Report : 2 Displayed | Download in RIS Format
| Other project views: | All 8 publications | 3 publications in selected types | All 2 journal articles |
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Evans MF, Gilpatric SM, Liu L. Regulation with direct benefits of information disclosure and imperfect monitoring. Journal of Environmental Economics and Management 2009;57(3):284-292. |
R832847 (2006) |
Exit Exit |
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Gilpatric SM. Risk taking in contests and the role of carrots and sticks. Economic Inquiry 2009;47(2):266-277. |
R832847 (2006) |
Exit Exit |
Supplemental Keywords:
Public Policy: decision-making, environmental corporate governance, environmental monitoring and enforcement, mandatory information disclosure, policy design; Scientific Disciplines: economic theory, behavioral economics and finance, experimental economics; Methods/Techniques: laboratory experiments in economics, economic theory, econometric analysis; Sectors: industry (subject to regulations requiring self-reporting of environmental performance) e.g., chemical (SIC 28xx), appliances (SIC 363x), and automotive (SIC 3711, 3713); Economics and Business, environmental behavior, public reporting, policy making, toxic release inventory, impact of federal policy instruments, auditing model, compliance assistance, right-to-know programs, TRI, fuel economy information, corporate environmental behavior, information dissemination,, Scientific Discipline, INDUSTRY, Economic, Social, & Behavioral Science Research Program, Social Science, Economics and Business, Small Businesses, Corporate Performance, compliance assistance, fuel economy information, public reporting, right-to-know programs, policy making, TRI, corporate environmental behavior, impact of federal policy instruments, environmental compliance determinants, information dissemination, auditing modelProgress and Final Reports:
Original AbstractThe perspectives, information and conclusions conveyed in research project abstracts, progress reports, final reports, journal abstracts and journal publications convey the viewpoints of the principal investigator and may not represent the views and policies of ORD and EPA. Conclusions drawn by the principal investigators have not been reviewed by the Agency.