Public vs. Private Firms: Energy Efficiency, Toxic Emissions and Abatement Spending

Forthcoming, Advances in Strategic Management: Sustainability, Stakeholder Governance and Corporate Social Responsibility

34 Pages Posted: 27 Feb 2018

See all articles by Rachelle C. Sampson

Rachelle C. Sampson

University of Maryland - Robert H. Smith School of Business; Georgetown University - Robert Emmett McDonough School of Business

Yue Maggie Zhou

University of Michigan, Stephen M. Ross School of Business

Date Written: February 15, 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 1980-2009, information on pollution from the EPA Toxic Release Inventory (TRI) and pollution abatement spending from the PACE 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.

Keywords: public or private ownership, energy efficiency, toxic emissions, institutional ownership, Clean Air Act

Suggested Citation

Sampson, Rachelle C. and Zhou, Yue Maggie, Public vs. Private Firms: Energy Efficiency, Toxic Emissions and Abatement Spending (February 15, 2018). Forthcoming, Advances in Strategic Management: Sustainability, Stakeholder Governance and Corporate Social Responsibility, Available at SSRN: https://ssrn.com/abstract=3125155 or http://dx.doi.org/10.2139/ssrn.3125155

Rachelle C. Sampson (Contact Author)

University of Maryland - Robert H. Smith School of Business ( email )

Van Munching Hall
University of Maryland
College Park, MD 20742-1815
United States
(301) 405-7658 (Phone)

HOME PAGE: http://www.linkedin.com/in/rachelle-sampson-68a3b610/

Georgetown University - Robert Emmett McDonough School of Business ( email )

3700 O Street, NW
Washington, DC 20057
United States

Yue Maggie Zhou

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI 48109
United States

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