Determinants of Monetary Penalties for Environmental Violations
Habib, A., Bhuiyan, M.B.U., Determinants of monetary penalties for environmental violations, Business Strategy and the Environment, Forthcoming
Posted: 6 Feb 2017
Date Written: November 14, 2016
Abstract
This research investigates the likely determinants of monetary penalties for poor environmental performance. We retrieve data from Bloomberg on the monetary penalties imposed on companies in the European Union (EU) found to have performed poorly in Corporate Social Responsibility (CSR), and particularly in the environmental aspects of CSR. Our primary findings reveal that firms with high levels of greenhouse gas and hazardous waste emissions are more likely to receive monetary penalties. On the other hand, firms that invest in green supply chain practices and disclose environment-related matters more, avoid monetary penalties. We also find that firms having executive compensation linked with environmental compliance face relatively more monetary penalties. This finding adds a new dimension to the voluminous research on executive compensation that has investigated primarily the effects of cash and stock option-based compensation schemes on pay-performance sensitivities.
Keywords: Environmental violation, monetary penalties, environmental disclosures, green supply chain management, managerial incentives
JEL Classification: F64, Q56, M14, K32, M41
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