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Corporate environmentalism in a managerial delegation and abatement subsidy policy

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  • Sang-Ho Lee
  • Chul-Hi Park

Abstract

This study examines strategic corporate environmentalism in a managerial delegation contract within a product differentiated duopolistic framework in which polluting firms can purchase abatement goods from an eco-industry. We emphasize a cost pass-through effect under price competition, which can restrict the outputs of polluting firms but increase their profits. We then construct an abatement subsidy policy and show that the government can induce the firm’s profitable environmental concern to be socially desirable by substituting the output-restriction behavior with the adoption of abatement goods. Our analysis supports the Porter hypothesis that given a well-designed government regulation on the voluntary initiative of self-regulation, Pareto-improving alignment between private and social incentives is feasible and attainable.

Suggested Citation

  • Sang-Ho Lee & Chul-Hi Park, 2021. "Corporate environmentalism in a managerial delegation and abatement subsidy policy," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 28(5), pages 546-561, September.
    • Handle: RePEc:taf:raaexx:v:28:y:2021:i:5:p:546-561
    DOI: 10.1080/16081625.2019.1587302
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    Cited by:

    1. Xu, Lili & Chen, Yuyan & Lee, Sang-Ho, 2022. "Emission tax and strategic environmental corporate social responsibility in a Cournot–Bertrand comparison," Energy Economics, Elsevier, vol. 107(C).
    2. Chul‐Hi Park & Sang‐Ho Lee, 2023. "Emission taxation, green R&D, and managerial delegation contracts with environmental and sales incentives," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(4), pages 2366-2377, June.
    3. Xing Mingqing & Lee Sang-Ho, 2024. "The Strategic Adoption of Environmental Corporate Social Responsibility with Network Externalities," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 24(1), pages 399-418, January.
    4. Chul‐Hi Park & Sang‐Ho Lee, 2023. "Environmental corporate social responsibility under price competition and the second‐mover advantage: An endogenous timing approach," International Journal of Economic Theory, The International Society for Economic Theory, vol. 19(4), pages 817-829, December.
    5. Lili Xu & Sang‐Ho Lee, 2022. "Non‐cooperative and cooperative environmental corporate social responsibility with emission taxes," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(7), pages 2849-2862, October.

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