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Firm ownership and pollution

Author

Listed:
  • Kwok, Tsz Chun
  • Spiro, Daniel
  • van Benthem, Arthur A.

Abstract

We provide a theoretical micro foundation for how much pollution (negative externalities) a firm will internalize based on the ownership distribution of its shareholders. Small shareholders, compared to large ones, want the firm to spend more on avoiding pollution since they suffer less profit loss for the same environmental benefit. In particular, if a shareholder holds a share of 1/N, where N is the population in society, that shareholder’s preferences align with a social planner’s. Three theoretical predictions arise. First, small shareholders will systematically vote for a greener corporate profile. Second, firms with a smaller weighted-median shareholder will pollute less. Third, countries with concentrated corporate wealth holdings and/or more individualized firm ownership will pollute more. This implies that standard models of externalities in environmental economics and macroeconomics containing representative agents are either internally inconsistent or not fully specified.

Suggested Citation

  • Kwok, Tsz Chun & Spiro, Daniel & van Benthem, Arthur A., 2026. "Firm ownership and pollution," Journal of Environmental Economics and Management, Elsevier, vol. 136(C).
    • Handle: RePEc:eee:jeeman:v:136:y:2026:i:c:s0095069625001494
    DOI: 10.1016/j.jeem.2025.103265
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    Keywords

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    JEL classification:

    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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