Cracker Barrel on Regulating Responsibility

Business and the Environment

Why do firms voluntarily over-comply?

Konar and Cohen (2000) contend that,

The underlying theory is that firm-level pollution varies because of both firm-specific factors that affect the “ability” of the firm to reduce pollution (such as age of assets and financial ability) and firm-level “incentives” (such as community pressures or effect on brand name reputation). Our key finding is that the largest firms are most likely to reduce emissions (both in an absolute sense and relative to their industry peers) subsequent to this new information being made public. We also find that financial ability plays an important role in emission levels, as firms with constrained cash flow positions were least likely to reduce emissions. On the other hand, we were unable to find any linkage between “closeness to consumer” (e.g., level of advertising expenditures or other forms of consumer marketing versus commodity-type products sold as intermediate goods) and firm-level emission reductions. Moreover, there is little evidence that firm-specific negative media attention had any impact on firm behavior after controlling for firm size.

Let’s run these tests again in an environment where social media plays a larger role…


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