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Determinants of monetary penalties for environmental violations

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  • Ahsan Habib
  • Md Borhan Uddin Bhuiyan

Abstract

This research investigates the likely determinants of monetary penalties for poor environmental performance. We retrieve data from Bloomberg on the monetary penalties imposed on companies in the European Union (EU) found to have performed poorly in corporate social responsibility (CSR), and particularly in the environmental aspects of CSR. Our primary findings reveal that firms with high levels of greenhouse gas and hazardous waste emissions are more likely to receive monetary penalties. On the other hand, firms that invest in green supply chain practices and disclose environment‐related matters avoid monetary penalties more. We also find that firms having executive compensation linked with environmental compliance face more monetary penalties. This finding adds a new dimension to the voluminous research on executive compensation that has investigated primarily the effects of cash and stock option‐based compensation schemes on pay–performance sensitivities. Copyright © 2017 John Wiley & Sons, Ltd and ERP Environment

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  • Ahsan Habib & Md Borhan Uddin Bhuiyan, 2017. "Determinants of monetary penalties for environmental violations," Business Strategy and the Environment, Wiley Blackwell, vol. 26(6), pages 754-775, September.
    • Handle: RePEc:bla:bstrat:v:26:y:2017:i:6:p:754-775
    DOI: 10.1002/bse.1947
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    4. Ruiqian Li & Ramakrishnan Ramanathan & Guanghua Xu, 2023. "The impact of penalties for environmental violations on corporate environmental responsibility," Sustainable Development, John Wiley & Sons, Ltd., vol. 31(3), pages 1343-1363, June.
    5. Anton Shevchenko, 2021. "Do financial penalties for environmental violations facilitate improvements in corporate environmental performance? An empirical investigation," Business Strategy and the Environment, Wiley Blackwell, vol. 30(4), pages 1723-1734, May.
    6. Rashid Zaman & Stephen Bahadar & Haroon Mahmood, 2021. "Corporate irresponsibility and stock price crash risk," International Review of Finance, International Review of Finance Ltd., vol. 21(3), pages 786-820, September.
    7. Le Luo & Qingliang Tang & Juan Peng, 2018. "The direct and moderating effects of power distance on carbon transparency: An international investigation of cultural value and corporate social responsibility," Business Strategy and the Environment, Wiley Blackwell, vol. 27(8), pages 1546-1557, December.
    8. Thi‐Hong‐Van Hoang & Wojciech Przychodzen & Justyna Przychodzen & Elysé A. Segbotangni, 2020. "Does it pay to be green? A disaggregated analysis of U.S. firms with green patents," Business Strategy and the Environment, Wiley Blackwell, vol. 29(3), pages 1331-1361, March.
    9. Habiba Al-Shaer & Khaldoon Albitar & Jia Liu, 2023. "CEO power and CSR-linked compensation for corporate environmental responsibility: UK evidence," Review of Quantitative Finance and Accounting, Springer, vol. 60(3), pages 1025-1063, April.
    10. Seonghoon Kim & Ann Terlaak & Matthew Potoski, 2021. "Corporate sustainability and financial performance: Collective reputation as moderator of the relationship between environmental performance and firm market value," Business Strategy and the Environment, Wiley Blackwell, vol. 30(4), pages 1689-1701, May.
    11. Gupta, Shreekant & Saksena, Shalini & Baris, Omer F., 2019. "Environmental enforcement and compliance in developing countries: Evidence from India," World Development, Elsevier, vol. 117(C), pages 313-327.

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