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Effects of information-based regulation on financial outcomes: Evidence from the European Union's public emission registry

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  • Earnhart, Dietrich
  • Germeshausen, Robert
  • von Graevenitz, Kathrine

Abstract

Information-based policies play an important role in environmental protection efforts around the world. These policies use information provision and/or disclosure to shape behavior in order to meet the policy objective; for example, mandatory information disclosure requires firms to measure and report their pollutant emissions. This study investigates the influence of a particular information-based policy - the European Union's mandatory and public emission registry of polluting facilities - on financial outcomes of German firms: revenues, costs, and profits. Using detailed firm-level data for the years 1998 to 2016, we exploit size- and pollution-specific reporting thresholds to isolate the effect of this policy. We compare firms that own facilities required to report in the first EPER wave with similar firms that do not own such facilities. For this comparison, we deploy both a difference-in-differences design and an event study. Our findings suggest that the introduction of EPER in 2001 increased both operating revenues and expenditures, yielding a neutral impact on the operating profits of affected firms. These results support neither of the two competing hypotheses regarding financial outcomes: costly regulation hypothesis and Porter Hypothesis.

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  • Earnhart, Dietrich & Germeshausen, Robert & von Graevenitz, Kathrine, 2022. "Effects of information-based regulation on financial outcomes: Evidence from the European Union's public emission registry," ZEW Discussion Papers 22-015, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:22015
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    1. Germeshausen, Robert & Chlond, Bettina & Tchorzewska, Kinga & von Graevenitz, Kathrine, 2022. "ME-FINE: Mannheim European panel on Financial Indicators and Emissions," ZEW Dokumentationen 22-01, ZEW - Leibniz Centre for European Economic Research.

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    More about this item

    Keywords

    Information-based Regulation; Environmental Policy; Financial Performance; Porter Hypothesis;
    All these keywords.

    JEL classification:

    • K32 - Law and Economics - - Other Substantive Areas of Law - - - Energy, Environmental, Health, and Safety Law
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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