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A theory of environmental risk disclosure

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  • Sinclair-Desgagne, Bernard
  • Gozlan, Estelle

Abstract

The regulation of environmental risks increasingly emphasizes the awareness and empowerment of stakeholders. The success of this approach, however, seems to depend crucially on the quality of environmental disclosures. In this paper we investigate the amount and quality of the information that would be voluntarily delivered to some stakeholder by a potential polluter. We find that information may be hazier when the stakeholder is confident (or naive) a priori, the cost of analyzing the received reports increases little with their complexity, or a polluter's net expected payoff from undertaking an industrial activity that would turn out to be unsafe is small. A worried stakeholder and a low cost of producing more accurate figures, on the other hand, may favor disclosure of high-quality information. By delivering information of very good quality, safe firms can set themselves apart more easily from the dangerous ones the higher the relative ex post payoff from their current industrial activity. The implications of this framework for the scope and design of public programs of environmental disclosure are briefly examined. La réglementation des risques environnementaux met de plus en plus l'accent sur l'information et la responsabilisation des parties prenantes. Le succès de cette approche repose toutefois largement sur la qualité de l'information fournie par les entreprises visées. Cet article porte sur la quantité et la qualité de l'information qui serait volontairement fournie à une partie prenante par un pollueur potentiel. On trouve que cette information sera moins précise lorsque la partie prenante est confiante (voire naïve) a priori, que le coût d'analyse de l'information livrée croît avec la complexité de celle-ci, ou que le revenu attendu par une entreprise se révélant être en non conformité est petit. En revanche, une partie prenante inquiète et un faible coût de production de données précises encouragent la livraison d'une information de

(This abstract was borrowed from another version of this item.)

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Environmental Economics and Management.

Volume (Year): 45 (2003)
Issue (Month): 2, Supplement 1 (March)
Pages: 377-393

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Handle: RePEc:eee:jeeman:v:45:y:2003:i:2,supplement1:p:377-393

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Web page: http://www.elsevier.com/locate/inca/622870

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  1. Konar, Shameek & Cohen, Mark A., 1997. "Information As Regulation: The Effect of Community Right to Know Laws on Toxic Emissions," Journal of Environmental Economics and Management, Elsevier, vol. 32(1), pages 109-124, January.
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  6. Grossman, Sanford J, 1981. "The Informational Role of Warranties and Private Disclosure about Product Quality," Journal of Law and Economics, University of Chicago Press, vol. 24(3), pages 461-83, December.
  7. Phillip C. Stocken, 2000. "Credibility of Voluntary Disclosure," RAND Journal of Economics, The RAND Corporation, vol. 31(2), pages 359-374, Summer.
  8. Khanna, Madhu & Quimio, Wilma Rose H. & Bojilova, Dora, 1998. "Toxics Release Information: A Policy Tool for Environmental Protection," Journal of Environmental Economics and Management, Elsevier, vol. 36(3), pages 243-266, November.
  9. Paul R. Milgrom & John Roberts, 1985. "Relying on the Information of Interested Parties," Cowles Foundation Discussion Papers 749, Cowles Foundation for Research in Economics, Yale University.
  10. Trueman, Brett, 1986. "Why do managers voluntarily release earnings forecasts?," Journal of Accounting and Economics, Elsevier, vol. 8(1), pages 53-71, March.
  11. H.S. Shin, 1994. "News Management and the Value of Firms," RAND Journal of Economics, The RAND Corporation, vol. 25(1), pages 58-71, Spring.
  12. Diamond, Douglas W, 1985. " Optimal Release of Information by Firms," Journal of Finance, American Finance Association, vol. 40(4), pages 1071-94, September.
  13. Verrecchia, Robert E., 1983. "Discretionary disclosure," Journal of Accounting and Economics, Elsevier, vol. 5(1), pages 179-194, April.
  14. Fishman, Michael J & Hagerty, Kathleen M, 1990. "The Optimal Amount of Discretion to Allow in Disclosure," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 427-44, May.
  15. V. Crawford & J. Sobel, 2010. "Strategic Information Transmission," Levine's Working Paper Archive 544, David K. Levine.
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  18. Teoh, Siew Hong & Hwang, Chuan Yang, 1991. "Nondisclosure and Adverse Disclosure as Signals of Firm Value," Review of Financial Studies, Society for Financial Studies, vol. 4(2), pages 283-313.
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Cited by:
  1. Patricia Crifo & Vanina Forget, 2012. "The Economics of Corporate Social Responsibility: A Survey," Working Papers hal-00720640, HAL.
  2. Bernard Sinclair-Desgagné, 2004. "Corporate Strategies For Managing Environmental Risk (The International Library Of Environmental Economics And Policy – Volume xx)," CIRANO Working Papers 2004s-43, CIRANO.
  3. Kessler, Denis, 2008. "Insurance market mechanisms and government interventions," Journal of Banking & Finance, Elsevier, vol. 32(1), pages 4-14, January.
  4. Johnstone, Nick & Labonne, Julien, 2009. "Why do manufacturing facilities introduce environmental management systems? Improving and/or signaling performance," Ecological Economics, Elsevier, vol. 68(3), pages 719-730, January.
  5. Bernard Sinclair-Desgagné & Ingrid Peignier & Nathalie de Marcellis-Warin, 2003. "Informational Regulation of Industrial Safety - An Examination of the U.S. "Local Emergency Planning Committees"," CIRANO Working Papers 2003s-03, CIRANO.
  6. Anton, Wilma Rose Q., 2005. "The Choice of Management Practices: What Determines the Design of an Environmental Management System?," 2005 Annual meeting, July 24-27, Providence, RI 19503, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  7. Johansson-Stenman, Olof, 2006. "Mad Cows, Terrorism and Junk Food: Should Public Policy Reflect Subjective or Objective Risks?," Working Papers in Economics 194, University of Gothenburg, Department of Economics.

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