Coerced Confessions: Self-Policing in the Shadow of the Regulator

Abstract:     
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 regulatory enforcement activities influence organizations' decisions to self-police. We created a comprehensive dataset for the Audit Policy, a United States Environmental Protection Agency (US EPA) program that encourages companies to self-disclose violations of environmental laws and regulations in exchange for reduced sanctions. We find that facilities are more likely to self-disclose if they were recently subjected to one of several different enforcement measures and if they were provided with immunity from prosecution for self-disclosed violations.

Keywords: Enforcement, regulations, environmental protection, compliance, voluntary programs, adoption

JEL Classification: I18, L51, K23, K32, K42, M14, Q28

Accepted Paper Series