Investing in Greater Environmental Responsibility

Alexander P. Ilyin ()
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Alexander P. Ilyin: Moscow State Institute of International Relations

Chapter Chapter 32 in Industry 4.0, 2021, pp 367-373 from Springer

Abstract: Abstract Statistics show that corporate spending on environmental goals is growing steadily. However, the return on these costs is not obvious. There is a hypothesis that corporations spend on environmental expenditures solely to attract the attention of environmentally responsible investors, whose share in the population is increasing over time. If this hypothesis is correct, then, other things being equal, the environmental costs of public corporations should be higher than that of private corporations. The aim of the work is to test this hypothesis. All other things being equal, the premise is best fulfilled if the same organization is first public, then private. Such a change in status is observed in transactions for the purchase of corporate assets with a high proportion of borrowing (LBO transactions). The research methodology is to assess the impact of LBO on the environmental performance of the organization. If the hypothesis is correct, then one of the consequences of LBO should be to reduce the organization’s “green” costs. Expenditures on environmental projects are not a separate item of corporate reporting, so only indirect information about the corporation’s environmental activities is available. A thematic search shows that among the organizations which were earlier public and engaged in environmental activity, there is not a single one regarding which it could be argued that after the transition to the status of private, environmental projects were terminated. This fact stops us from asserting that environmental projects pay off, since the motive of environmental activity can also be to get the attention of potential consumers. However, the very fact of LBO does not lead to a cessation of the organization’s environmental activity, means that the environmental responsibility of investors is not the only motive for the company’s environmental spending.

Keywords: Corporate environmental responsibility; Environmental reporting; Signaling theory; LBO; Private firms; Q57 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-030-75405-1_32

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DOI: 10.1007/978-3-030-75405-1_32

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