The Impact Of Environmental Protection Agency Penalties On Financial Performance

BUSINESS STRATEGY AND THE ENVIRONMENT(2018)

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Abstract
This study examines the impact of penalties assessed to publicly traded firms by the U.S. Environmental Protection Agency (EPA). Specifically, we look at whether there is an impact on earnings for firms that were fined by the EPA. There are two competing predictions regarding the impact of environmental penalties on earnings. Either there is no negative impact because firms allocate allowances for regulatory breaches or there is a negative impact because investors and stockholders have a preference to invest in efficient firms. This study contributes to the extant literature examining improvements in the business decision making related to corporate environmental management.
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Key words
environmental accounting,environmental penalties,environmental performance,environmental policy,green business,sustainable development
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