Firms’ Emissions and Self-Reporting Under Competitive Audit Mechanisms

Andreas Oestreich

Environmental & Resource Economics, 2015, vol. 62, issue 4, 949-978

Abstract: Many environmental tax systems rely on self-reported emissions by firms. These emission reports are verified through costly auditing efforts by regulatory agencies that are constrained in their auditing budgets. A typical assumption in the literature is that the agencies allocate audit efforts randomly among otherwise identical firms (random audit mechanism). This paper compares the incentives on firms’ emissions and self-reporting behavior under the random audit mechanism to the incentives under competitive audit mechanisms (CAMs). Under CAMs, higher reported emissions by a firm relative to other firms result in a lower audit intensity. This creates a reporting contest between the firms. The two CAMs under investigation apply different degrees of competitiveness in the reporting contest. I find that both CAMs lead to more truthful reporting, which is in line with the previous literature. Interestingly and novel to the literature, I find that some competition in reporting may induce fewer emissions compared with random auditing, while too much competition in reporting may induce comparatively higher emissions caused by firms. Copyright Springer Science+Business Media Dordrecht 2015

Keywords: Environmental regulation; Information disclosure; Regulatory compliance; Tournament theory; D62; H83; L51; Q58 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://hdl.handle.net/10.1007/s10640-014-9855-z (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:enreec:v:62:y:2015:i:4:p:949-978

Ordering information: This journal article can be ordered from
http://www.springer. ... al/journal/10640/PS2

DOI: 10.1007/s10640-014-9855-z

Access Statistics for this article

Environmental & Resource Economics is currently edited by Ian J. Bateman

More articles in Environmental & Resource Economics from Springer, European Association of Environmental and Resource Economists Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().