Causes and Consequences of Environmental Auditing: Evidence from Regulated Facilities in Michigan

Mary F. Evans, Lirong Liu () and Sarah Stafford ()
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Lirong Liu: Department of Economics and International Business, Sam Houston State University
Sarah Stafford: Department of Economics, College of William and Mary

No 78, Working Papers from Department of Economics, College of William and Mary

Abstract: Several rationales recently proposed to explain the willingness of firms to voluntarily conduct environmental audits suggest the potential for environmental audits to impact compliance outcomes in the long run. Using a unique facility-level dataset from Michigan, we examine both the determinants of environmental auditing and the effects of environmental auditing on long term compliance with the Resource Conservation and Recovery Act (RCRA). Our empirical methodology accounts for the potential endogeneity of the audit outcome and censoring of the future compliance measure. We find that larger facilities and those subject to more stringent regulations are more likely to audit. We also find that facilities with poor compliance records are less likely to audit. However, we find no significant long-run impact of auditing on RCRA compliance among these Michigan facilities.

Keywords: Environmental Auditing; Environmental Compliance; Voluntary Environmental Initiatives; Self-Policing (search for similar items in EconPapers)
JEL-codes: K32 K42 Q52 Q58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-agr, nep-env and nep-law
Date: Written

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