Role of Environmental Self -Auditing and Audit Policies in Regulatory Compliance
Widyawati, Diah
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https://hdl.handle.net/2142/82988
Description
Title
Role of Environmental Self -Auditing and Audit Policies in Regulatory Compliance
Author(s)
Widyawati, Diah
Issue Date
2007
Doctoral Committee Chair(s)
Khanna, Madhu
Department of Study
Agricultural and Consumer Economics
Discipline
Agricultural and Consumer Economics
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
Ph.D.
Degree Level
Dissertation
Keyword(s)
Environmental Sciences
Language
eng
Abstract
We examine the effect of voluntary efforts to self-audit on compliance with Clean Air Act regulations. It also examines the effect that state audit and immunity laws have on the incentives for improving compliance. Using data for a sample of S&P 500 firms, we estimate a bivariate probit model with compliance status and decision to self-audit as two discrete choice variables and a duration model with the length of compliance month as the dependent variable. The empirical analysis controls for the incentives created for compliance and for self-auditing by regulatory and community-based pressures and by pressures created through toxic release information disclosure. We find that facilities belonging to firms subject to inspections in the past, that face a stronger threat of liabilities for Superfund sites, that are more visible due to size and that have a larger ratio of toxic releases relative to the industry are more likely to undertake an environmental audit. Facilities that self-audit are more likely to be and stay longer in compliance with Clean Air Act regulations. Audit privilege and immunity policies have significant and opposite effects on facilities. While audit privilege policies reduce incentives for compliance, audit immunity policies significantly increase them, particularly for firms that have high costs of abatement and would otherwise have a higher likelihood of being in violation. Additionally, we find that facilities that achieve larger reductions in their toxic releases compared to their industry/region are more likely to be and stay longer in compliance with air regulations.
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