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Corporate Expenditure on Environmental Protection

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  • Stefanie Haller
  • Liam Murphy

Abstract

We examine the determinants of firm's current environmental expenditure and firm's capital investment in equipment for pollution control using a Heckman selection model. As regards current environmental expenditure, we find that larger, exporting firms and firms subject to the Integrated Pollution Prevention and Control directive are more likely to spend resources at all. Once the decision to commit resources has been taken, larger firms, firms that are foreign-owned, and firms that report low shares of water and refuse charges in turnover have higher absolute levels of environmental expenditure. With respect to investment in equipment for pollution control, we find that energy intensive and exporting firms are more likely to invest at all. Once the decision to invest has been taken, larger firms and firms that report high water and refuse charges invest more in equipment for pollution control. This suggests that the firms for whom environmental concerns are most costly in terms of production and image do most to address them.
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  • Stefanie Haller & Liam Murphy, 2012. "Corporate Expenditure on Environmental Protection," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 51(2), pages 277-296, February.
    • Handle: RePEc:kap:enreec:v:51:y:2012:i:2:p:277-296
    DOI: 10.1007/s10640-011-9499-1
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    3. Jurate Jaraite & Andrius Kazukauskas & Tommy Lundgren, 2014. "The effects of climate policy on environmental expenditure and investment: evidence from Sweden," Journal of Environmental Economics and Policy, Taylor & Francis Journals, vol. 3(2), pages 148-166, July.
    4. Becker, Randy A. & Pasurka, Carl & Shadbegian, Ronald J., 2013. "Do environmental regulations disproportionately affect small businesses? Evidence from the Pollution Abatement Costs and Expenditures survey," Journal of Environmental Economics and Management, Elsevier, vol. 66(3), pages 523-538.
    5. Sheng Yao & Weiwei Zhang, 2020. "Is Private Entrepreneurs’ Religiosity Conducive to Environmental Investment? Evidence from China," Sustainability, MDPI, vol. 12(4), pages 1-17, February.
    6. Johan Graafland & Reyer Gerlagh, 2019. "Economic Freedom, Internal Motivation, and Corporate Environmental Responsibility of SMEs," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 74(3), pages 1101-1123, November.
    7. Stefan Borsky & Esther Blanco, 2014. "Setting one voluntary standard in a heterogeneous Europe - EMAS, corruption and stringency of environmental regulations," Working Papers 2014-29, Faculty of Economics and Statistics, Universität Innsbruck.
    8. Qian, Xuesong & Ding, Hai & Ding, Zifang, 2023. "Governmental inspection and firm environmental protection expenditure: Evidence from China," Economic Modelling, Elsevier, vol. 123(C).
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    10. Purcel, Alexandra-Anca, 2023. "Environmental protection expenditures and EU ETS: Evidence from Romania," Finance Research Letters, Elsevier, vol. 58(PB).
    11. Becker, Randy A. & Pasurka, Carl & Shadbegian, Ronald J., 2013. "Do environmental regulations disproportionately affect small businesses? Evidence from the Pollution Abatement Costs and Expenditures survey," Journal of Environmental Economics and Management, Elsevier, vol. 66(3), pages 523-538.
    12. Jacint Balaguer & Ana Cuadros & Jose García-Quevedo, 2023. "Does foreign ownership promote environmental protection? Evidence from firm-level data," Small Business Economics, Springer, vol. 60(1), pages 227-244, January.
    13. Pasquale Marcello Falcone, 2018. "Green investment strategies and bank-firm relationship: a firm-level analysis," Economics Bulletin, AccessEcon, vol. 38(4), pages 2225-2239.
    14. Jaraite, Jurate & Kažukauskas, Andrius & Lundgren, Tommy, 2012. "Determinants of Environmental Expenditure and Investment: Evidence from Sweden," CERE Working Papers 2012:7, CERE - the Center for Environmental and Resource Economics.
    15. Sascha Rexhäuser & Christian Rammer, 2014. "Environmental Innovations and Firm Profitability: Unmasking the Porter Hypothesis," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 57(1), pages 145-167, January.
    16. Zhang, Cheng & Zhou, Bo, 2023. "Where should the money go? The green effect of governmental guidance when sustainable finance impacts brown firms," Pacific-Basin Finance Journal, Elsevier, vol. 78(C).
    17. Sun, Kege & Zhou, Fengqi & Liu, Xinyu, 2024. "Study on the impact of emission trading scheme on technological progress of power generation sector in China: A perspective from energy transition," Energy, Elsevier, vol. 302(C).
    18. Shujahat Haider Hashmi & Munawar Hussain & Raja Muhammad Ahsan Ilyas & Muhammad Asif Khan, 2017. "Sensitivity analysis for the determinants of investment appraisal," The Audit Financiar journal, Chamber of Financial Auditors of Romania, vol. 15(148), pages 686-686.
    19. de Miguel, Carlos & Pazó, Consuelo, 2017. "Environmental protection, innovation and price-setting behavior in Spanish manufacturing firms," Energy Economics, Elsevier, vol. 68(S1), pages 116-124.
    20. Liang, Quanxi & Li, Qiumei & Lu, Meiting & Shan, Yaowen & Wang, Peipei, 2024. "Peer effects on corporate environmental protection: Competition, information cascades or career concerns?," Pacific-Basin Finance Journal, Elsevier, vol. 84(C).
    21. Siedschlag, Iulia & Yan, Weijie, 2020. "What drives firms’ decisions to spend on environmental protection," Papers WP670, Economic and Social Research Institute (ESRI).
    22. Wang, Quan-Jing & Wang, Hai-Jie & Chang, Chun-Ping, 2022. "Environmental performance, green finance and green innovation: What's the long-run relationships among variables?," Energy Economics, Elsevier, vol. 110(C).
    23. John P. Weche Geluebcke & Isabella Wedl, 2013. "Environmental Protection of Foreign Firms in Germany: Does the country of origin matter?," Working Paper Series in Economics 267, University of Lüneburg, Institute of Economics.

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    More about this item

    Keywords

    Capital expenditure on pollution abatement; Environmental expenditure; Firm-level analysis; Manufacturing; Q52;
    All these keywords.

    JEL classification:

    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects

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