Turning Themselves In: Why Companies Disclose Regulatory Violations
Jodi L. Short
University of California Hastings College of the Law
Michael W. Toffel
Harvard Business School (HBS) - Technology & Operations Management Unit
July 13, 2005
University of California Center for Responsible Business Working Paper No. 17
As part of a recent trend toward more cooperative relations between regulators and industry, novel government programs are encouraging firms to monitor their own regulatory compliance and voluntarily report their own violations. In this study, we examine how enforcement activities, statutory protections, community pressure, and organizational characteristics influence organizations' decisions to self-police. We created a comprehensive dataset for the "Audit Policy", a United States Environmental Protection Agency program that encourages companies to self-disclose violations of environmental laws and regulations in exchange for reduced sanctions. We find that facilities were more likely to self-disclose if they were recently inspected or subjected to an enforcement action, were narrowly targeted for heightened scrutiny by a US EPA initiative, and were larger and thus more prominent in their environment. While we find some evidence that state-level statutory immunity facilitates self-disclose, we find no evidence that statutory audit privilege does so.
Number of Pages in PDF File: 43
Keywords: Enforcement, regulations, environmental protection, compliance, voluntary programs, adoption
JEL Classification: I18, L51, K23, K32, K42, M14, Q28
Date posted: August 16, 2005
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