Turning Themselves In: Why Companies Disclose Regulatory Violations

University of California Center for Responsible Business Working Paper No. 17

43 Pages Posted: 16 Aug 2005  

Jodi L. Short

University of California Hastings College of the Law

Michael W. Toffel

Harvard Business School

Date Written: July 13, 2005

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 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.

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

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

Suggested Citation

Short, Jodi L. and Toffel, Michael W., Turning Themselves In: Why Companies Disclose Regulatory Violations (July 13, 2005). University of California Center for Responsible Business Working Paper No. 17. Available at SSRN: https://ssrn.com/abstract=776586 or http://dx.doi.org/10.2139/ssrn.776586

Jodi L. Short (Contact Author)

University of California Hastings College of the Law ( email )

200 McAllister Street
San Francisco, CA 94102
United States

Michael W. Toffel

Harvard Business School ( email )

Boston, MA 02163
United States
617.384.8043 (Phone)

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