Do Polluting Firms Care About the Environment?

41 Pages Posted: 23 May 2023

See all articles by Vijaya Marisetty

Vijaya Marisetty

University of Twente; University of Hyderabad

Salu Prasad

Manipal Academy of Higher Education (MAHE)

Varsha Mamidi

University of Hyderabad

Abstract

We provide direct evidence on how firms prioritize the Corporate Environment Responsibility (CER) budget as part of their Corporate Social Responsibility (CSR) in India. We argue that polluting firms share higher responsibility towards the environment and hence they should spend more on CER, compared to non-polluting firms (stakeholder theory), and also their managers should signal a higher commitment by internalizing CER when they expand their operation (legitimacy theory). Based on 2,464 CSR reports of Indian firms, our results indicate that only 19% spend on CER. However, within the firms that spend on CER, polluting firms not only spend more but also prioritize CER within CSR expenses budget. Further, our analysis indicates that, compared to non-polluting firms, polluting firms’ environmental spending budgets increase with an increase in their capital expenditure. However, we find that polluting firms’ overall CSR commitment favors non-CER than CER expenses. In conclusion, our results call for more global evidence and policy debate on CER investments by firms.

Keywords: Corporate environmental responsibility, Corporate Social Responsibility, Stakeholder theory, Legitimacy theory, Government policy, Pollution

Suggested Citation

Marisetty, Vijaya and Prasad, Salu and Mamidi, Varsha, Do Polluting Firms Care About the Environment?. Available at SSRN: https://ssrn.com/abstract=4456739 or http://dx.doi.org/10.2139/ssrn.4456739

Vijaya Marisetty (Contact Author)

University of Twente ( email )

Postbus 217
Enschede
Netherlands
+91622254326 (Phone)

University of Hyderabad ( email )

Central University (PO)
Andhra Pradesh
Hyderabad, CA Andhra Pradesh 500 046
India

Salu Prasad

Manipal Academy of Higher Education (MAHE) ( email )

Varsha Mamidi

University of Hyderabad ( email )

Central University (PO)
Andhra Pradesh
Hyderabad, CA 500 046
India

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