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The impact of Environmental Protection Agency penalties on financial performance

Author

Listed:
  • Jorge A. Romero
  • Martin Freedman
  • Neale G. O'Connor

Abstract

This study examines the impact of penalties assessed to publicly traded firms by the U.S. Environmental Protection Agency (EPA). Specifically, we look at whether there is an impact on earnings for firms that were fined by the EPA. There are two competing predictions regarding the impact of environmental penalties on earnings. Either there is no negative impact because firms allocate allowances for regulatory breaches or there is a negative impact because investors and stockholders have a preference to invest in efficient firms. This study contributes to the extant literature examining improvements in the business decision making related to corporate environmental management.

Suggested Citation

  • Jorge A. Romero & Martin Freedman & Neale G. O'Connor, 2018. "The impact of Environmental Protection Agency penalties on financial performance," Business Strategy and the Environment, Wiley Blackwell, vol. 27(8), pages 1733-1740, December.
    • Handle: RePEc:bla:bstrat:v:27:y:2018:i:8:p:1733-1740
    DOI: 10.1002/bse.2239
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    References listed on IDEAS

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    2. Muhammad Sakandar Majid & Saba Malik & Sidra Mumtaz & Sana Akhtar & Iqra Zahoor & Soha Kanwal & Mubbra Habib & Mehmood Ahmed Husnain Hashmi, 2020. "Issues In Environmental Protection Agency And Recommendations To Solve The Problems," Environment & Ecosystem Science (EES), Zibeline International Publishing, vol. 5(1), pages 10-14, December.
    3. Margarita Robaina & Mara Madaleno, 2020. "The relationship between emissions reduction and financial performance: Are Portuguese companies in a sustainable development path?," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 27(3), pages 1213-1226, May.
    4. Khine Kyaw & Mojisola Olugbode & Barbara Petracci, 2022. "Stakeholder engagement: Investors' environmental risk aversion and corporate earnings," Business Strategy and the Environment, Wiley Blackwell, vol. 31(3), pages 1220-1231, March.
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    6. Zhiyang Hui & Haoyu Li & Ahmed A. Elamer, 2024. "Financing sustainability: How environmental disclosures shape bank lending decisions in emerging markets," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 31(5), pages 3940-3967, September.
    7. Kuo Zhou & Xianghui Jin & Xinru Li & Yunqing Tao, 2024. "Enhancing sustainable development through effective disclosure: Corporate environmental performance and readability," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 31(1), pages 274-291, January.

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