Common Ownership and Environmental Corporate Social Responsibility

Hirose, Kosuke and Matsumura, Toshihiro (2021): Common Ownership and Environmental Corporate Social Responsibility.

Abstract

We theoretically investigate how common ownership (or the extent of collusion in an industry) affects firms' voluntary commitment with emission restrictions and emissions abatement activities in an oligopoly. We find that common ownership reduces emissions by reducing output, and may stimulate emissions abatement activities if the degree of common ownership is small. However, significant common ownership always reduces emissions abatement activities. Additionally, common ownership may or may not improve welfare, depending on the implicit carbon cost.

• Item Type: MPRA Paper
• Language: English
• Keywords: corporate social responsibility, anticompetitive effect, voluntary emissions cap, emissions abatement
• Subjects: L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M1 - Business Administration > M14 - Corporate Culture ; Diversity ; Social Responsibility; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q57 - Ecological Economics: Ecosystem Services ; Biodiversity Conservation ; Bioeconomics ; Industrial Ecology

References

Backus, M., Conlon, C., Sinkinson, M., 2019. Common ownership in America: 1980--2017. NBER Working Paper No.25454.

Baron, D.P., 2001. Private politics, corporate social responsibility, and integrated strategy. Journal of Economics and Management Strategy 10 (1), 7--45. https://doi.org/10.1111/j.1430-9134.2001.00007.x

Baron, D.P., 2008. Managerial contracting and corporate social responsibility. Journal of Public Economics 92(1--2), 268--288. https://doi.org/10.1016/j.jpubeco.2007.05.008

Baumol, W.J., Oates, W.E., 1988. {\it The Theory of Environmental Policy} (second edition), Cambridge University Press, Cambridge.

Calveras, A., Ganuza, J.-J., Llobet, G., 2007. Regulation, corporate social responsibility and activism. Journal of Economics and Management Strategy 16(3), 719--740. https://doi.org/10.1111/j.1530-9134.2007.00155.x

Chen, L., Matsumura, T., Zeng, C., 2021. Welfare consequence of common ownership in a vertically related market. Journal of Industrial Economics, forthcoming.

Cyert, R.M. and Degroot, M.H., 1973. An analysis of cooperation and learning in a duopoly context. American Economic Review 63(1), 24--37.

Dixit, A.K., 1979. A model of duopoly suggestion a theory of entry barriers. Bell Journal of Economics 10(1), 20--32.

Egorov, G., Harstad, B., 2017. Private politics and public regulation. Review of Economic Studies 84(4), 1652--1682. https://doi.org/10.1093/restud/rdx009

Elhauge, E., 2016. Horizontal shareholding. Harvard Law Review 129, 1267--1317.

Escrihuela-Villar, M., 2015. A note on the equivalence of the conjectural variations solution and the coefficient of cooperation. B.E. Journal of Theoretical Economics 15(2), 473--480. https://doi.org/10.1515/bejte-2014-0094

Escrihuela-Villar, M. Guti\'{e}rrez-Hita, C., 2019. On competition and welfare enhancing policies in a mixed oligopoly. Journal of Economics 126(3), 259--274. https://doi.org/10.1007/s00712-018-0616-2

Farrell, J., Shapiro, C., 1990. Asset ownership and market structure in oligopoly. RAND Journal of Economics 21(2), 275--292. https://doi.org/10.2307/2555424

Fukuda, K., Ouchida, Y., 2020. Corporate social responsibility (CSR) and the environment: Does CSR increase emissions? Energy Economics 92, 104933. https://doi.org/10.1016/j.eneco.2020.104933

Gilo, D., Moshe, Y., Spiegel, Y., 2006. Partial cross ownership and tacit collusion. Rand Journal of Economics 37(1), 81--99. https://www.jstor.org/stable/25046228

Graff Zivin, J., Small, A., 2005. A Modigliani-Miller theory of altruistic corporate social responsibility. B.E. Journal of Economic Analysis and Policy 5, 1--19. https://doi.org/10.1515/1538-0653.1369

Hamamura, J., 2021. What level do disadvantaged firms weight rivals' profits in relative performance evaluations under quantity competition? Managerial and Decision Economics 42(2), 493--501. https://doi.org/10.1002/mde.3249

Helfand, G., 1991. Standards versus standards: The effect of different pollution restrictions. American Economic Review 81(3), 622--634. https://www.jstor.org/stable/2006524

Hirose, K., Matsumura, T., 2020. A Comparison between emission intensity and emission cap regulations. Energy Policy 137, 111115. https://doi.org/10.1016/j.enpol.2019.111115

Hirose, K., Lee, S.H., Matsumura, T., 2020. Noncooperative and cooperative environmental corporate social responsibility. Journal of Institutional and Theoretical Economics 176(3), 549--571. https://dpi.org/10.1628/jite-2020-0035

Holland, S.P., 2012. Emissions taxes versus intensity standards: Second-best environmental policies with incomplete regulation. Journal of Environmental Economics and Management 63(3), 375--387. https://doi.org/10.1016/j.jeem.2011.12.002

Holland, S.P., Hughes, J.E., Knittel, C.R., 2009. Greenhouse gas reductions under low carbon fuel standards? American Economic Journal: Economic Policy 1(1), 106--146. https://doi.org/10.1257/pol.1.1.106

Ino, H., Matsumura, T., 2021a. Optimality of emission pricing policies based on emission intensity targets under imperfect competition. Energy Economics 98, 105238. https://doi.org/10.1016/j.eneco.2021.105238

Ino, H., Matsumura, T., 2021b. Promoting green or restricting gray? An analysis of green portfolio standards. Economics Letters 198, 109650. https://doi.org/10.1016/j.econlet.2020.109650

Kitzmueller, M., Shimshack, J., 2012. Economic Perspectives on Corporate Social Responsibility. Journal of Economic Literature, 50 (1), 51--84. https://doi.org/10.1257/jel.50.1.51

Lambertini, L., Tampieri, A., 2015. Incentives, performance and desirability of socially responsible firms in a Cournot oligopoly. Economic Modelling 50, 40--48. https://doi.org/10.1016/j.econmod.2015.05.016

Lee, S.H., Park, C., 2019. Eco-Firms and the sequential adoption of environmental corporate social responsibility in the managerial delegation. B.E. Journal of Theoretical Economics 19(1), 1--9. https://doi.org/10.1515/bejte-2017-0043

Liu, C.C., Wang, L.F.S., Lee, S.H., 2015. Strategic environmental corporate social responsibility in a differentiated duopoly market. Economics Letters 129, 108--111. https://doi.org/10.1016/j.econlet.2015.02.027

L\'{o}pez, A.L., Vives, X., 2019. Overlapping ownership, R\&D spillovers, and antitrust policy. Journal of Political Economy 127(5), 2394--2437. https://doi.org/10.1086/701811

Lyon, T.P., Maxwell, J.W., 2004. Corporate Environmentalism and Public Policy. Cambridge University Press, Cambridge, UK.

Margolis, J.D., Elfenbein, H.A., Walsh, J.P., 2007. Does it pay to be good? A meta-analysis and redirection of research on the relationship between corporate social and financial performance. Unpublished Working Paper, Ross School of Business, University of Michigan.

Mankiw N.G., Whinston, M.D., 1986. Free entry and social inefficiency. RAND Journal of Economics 17(1), 48--58.

Matsumura, T., Matsushima, N., 2012. Competitiveness and stability of collusive behavior. Bulletin of Economic Research 64(s1), s22--s31. https://doi.org/10.1111/j.1467-8586.2012.00439.x

Matsumura, T., Matsushima, N., Cato, S., 2013. Competitiveness and R\&D competition revisited. Economic Modelling 31(1), 541--547. https://doi.org/10.1016/j.econmod.2012.12.016

Matsumura, T., Yamagishi, A., 2017. Long-run welfare effect of energy conservation regulation. Economics Letters 154, 64--68. https://doi.org/10.1016/j.econlet.2017.02.030

Maxwell, J.W., Lyon, T.P., Hackett, S.C., 2000. Self-regulation and social welfare: The political economy of corporate environmentalism. Journal of Law and Economics 43(2), 583--617. https://doi.org/10.1086/467466

McWilliams, A., Donald S. Siegel, D.S., 2001. Corporate social responsibility: A theory of the firm perspective. Academy of Management Review 26(1), 117--127. https://doi.org/10.2307/259398

McWilliams, A., Siegel, D.S., Wright, P.M., 2006. Corporate social responsibility: Strategic implications. Journal of Management Studies 43(1), 1--18. https://doi.org/10.1111/j.1467-6486.2006.00580.x

Pigou, A.C., 1932. The Economics of Welfare (fourth edition), MacMillan, London.

Poyago-Theotoky, J., Yong, S., 2019. Managerial delegation contracts, green R\&D and emissions taxation. B.E. Journal of Theoretical Economics 19(2), 1--10. https://doi.org/10.1515/bejte-2017-0128

Reynolds, R.J., Snapp, B.R., 1986. The competitive effects of partial equity interests and joint ventures. International Journal of Industrial Organization 4(2), 141--153. https://doi.org/10.1016/0167-7187(86)90027-5

Sato, S., Matsumura, T., 2020. Free entry under common ownership. Economics Letters 195, 109489. https://doi.org/10.1016/j.econlet.2020.109489

Schmalz, M.C., 2018. Common-ownership concentration and corporate conduct. Annual Review of Financial Economics 10, 413--448. https://doi.org/10.1146/annurev-financial-110217-022747

Vogel, D., 2005. The Market for Virtue: The Potential and Limits of Corporate Social Responsibility. Brookings Institution Press, Washington, DC.