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Does environmental compliance pay?

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  • Vasanthakumar N. Bhat

    (Pace University)

Abstract

This paper examines the relationship between environmental compliance and financial performance of large US companies. The environmental performance is measured in penalties assessed for violations of environmental regulations. The financial performance is represented by the profit margins. The regression models developed in this paper suggest that the degrees of environmental compliance have a positive influence on the profit margins. Conventional economic wisdom is that regulations impose costs and restrictions and therefore put companies at a competitive disadvantage. However, this paper is consistent with the proponents of environmental regulations who argue that tough regulations force companies to be innovative and as a result make them more productive.

Suggested Citation

  • Vasanthakumar N. Bhat, 1999. "Does environmental compliance pay?," Environment Systems and Decisions, Springer, vol. 19(4), pages 337-342, December.
    • Handle: RePEc:spr:envsyd:v:19:y:1999:i:4:d:10.1023_a:1006606005303
    DOI: 10.1023/A:1006606005303
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    References listed on IDEAS

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    1. Wayne B Gray & Ronald J Shadbegian, 1994. "Pollution Abatement Costs, Regulation And Plant-Level Productivity," Working Papers 94-14, Center for Economic Studies, U.S. Census Bureau.
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