Public versus Private Firms: Energy Efficiency, Toxic Emissions, and Abatement Spending
Sustainability, Stakeholder Governance, and Corporate Social Responsibility
ISBN: 978-1-78756-316-2, eISBN: 978-1-78756-315-5
Publication date: 10 August 2018
Abstract
We examine the effect of firm ownership status on three environmentally relevant variables: energy efficiency, toxic emissions, and spending on pollution abatement. Prior research has demonstrated that public firms invest less than private firms and suggests this difference is due pressure from investors to strongly favor short over long-term earnings. We extend this logic to other firm behavior, examining whether publicly owned facilities invest in energy efficiency and pollution reduction differently than privately owned facilities. Using data from the US Census of Manufactures from 1980 to 2009, information on pollution from the Environmental Protection Agency Toxic Release Inventory (TRI) and pollution abatement spending from the Pollution Abatement Costs and Expenditures survey, we find that facilities switching to public ownership are less energy efficient and spend less on pollution abatement than their privately owned counterparts. However, we also find that facilities switching to public ownership have lower toxic emissions than other facilities. We also examine how different sources of external pressures alter these results and find that increased regulatory scrutiny is correlated with increased energy efficiency, toxic emissions, and abatement spending. More concentrated institutional ownership in public firms is associated with lower energy efficiency as is a greater brand focus. These latter results are broadly consistent with the idea that publicly owned firms respond to pressures from investors with a reduced focus on environmentally relevant variables. However, since facilities switching to public ownership have lower toxic emissions, this suggests that there are two competing pressures in publicly owned facilities: cost pressures, consistent with lowered energy efficiency, and public perceptions, consistent with lower toxic emissions, particularly since TRI data became available. In this sense, the combination of ownership and transparency of information appears to influence how firms prioritize different stakeholders.
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Acknowledgements
Acknowledgments
The research in this chapter was conducted while Zhou was a Special Sworn Status researcher of the US Census Bureau at the Michigan Census Research Data Center (RDC). Support for this research at the Michigan Census RDC from NSF (ITR-0427889) is gratefully acknowledged. Any opinions and conclusions expressed herein are those of the authors and do not necessarily represent the views of the US Census Bureau. All results have been reviewed to ensure that no confidential information is disclosed. We thank Andrew King for information about the TRI database and Randy Becker for information about the PACE surveys. We also thank Wilbur Chung and Ashton Hawk for helpful suggestions and advice about implementing random coefficient models. Comments from colleagues at the University of Maryland and the Academy of Management Annual Conference are gratefully acknowledged.
Citation
Sampson, R.C. and Zhou, Y.M. (2018), "Public versus Private Firms: Energy Efficiency, Toxic Emissions, and Abatement Spending", Sustainability, Stakeholder Governance, and Corporate Social Responsibility (Advances in Strategic Management, Vol. 38), Emerald Publishing Limited, Leeds, pp. 37-68. https://doi.org/10.1108/S0742-332220180000038006
Publisher
:Emerald Publishing Limited
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