Coming Clean and Cleaning Up: Does Voluntary Self-Reporting Indicate Effective Self-Policing?
Michael W. Toffel
Harvard Business School (HBS) - Technology & Operations Management Unit
Jodi L. Short
University of California Hastings College of the Law
October 22, 2010
Harvard Business School Technology & Operations Mgt. Unit Research Paper No. 08-098
CELS 2009 4th Annual Conference on Empirical Legal Studies Paper
Georgetown Public Law Research Paper No. 11-15
Administrative agencies are increasingly establishing voluntary self-reporting programs both as an investigative tool and to encourage regulated firms to commit to policing themselves. We investigate whether self-reporting can reliably indicate effective self-policing efforts that might provide opportunities for enforcement efficiencies. We find that regulators used self-reports of legal violations as a heuristic for identifying firms that are effectively policing their own operations, shifting enforcement resources away from voluntary disclosers. We also find that firms that voluntarily disclosed regulatory violations and committed to self-policing improved their regulatory compliance and environmental performance, suggesting that the enforcement relief they received was warranted. Collectively, our results suggest that self-reporting can be a useful tool for reliably identifying and leveraging the voluntary self-policing efforts of regulated companies.
Date posted: July 29, 2009 ; Last revised: January 22, 2011