[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/cir/cirwor/96s-21.html
   My bibliography  Save this paper

Environmental Auditing in Management Systems and Public Policy

Author

Listed:
  • H. Landis Gabel
  • Bernard Sinclair-Desgagné
Abstract
New international standards for environmental auditing are now being actively promoted by public authorities and adopted by private firms. One important feature of these standards is their emphasis on managerial systems and incentives that support a wiser use of environmental resources. This paper studies such a system, in which incentive compensation may be based in part on the results of an environmental audit. It is found that optimal wages after an environmental audit is performed should have a greater range than wages paid when no audit has occured. It is also shown that the decision to conduct an environmental audit and the size of the expected wage in this case depend crucially on whether the agent's prudence (or precautionary motives) dominates or not his aversion to risk. It is finally found that the insertion of environmental audits within current management systems would certainly induce a manager to care more about the environment; moreover, although this may come at the expense of less concern for other activities, we find plausible circumstances in which properly designed environmental audits overcome such a tradeoff and increase the manager's attention to both environmental and traditional tasks. The public policy maker's role and interest in promoting environmental auditing standards is also discussed briefly. De nouvelles normes pour les audits environnementaux sont actuellement en train d'être élaborées et implantées par les gouvernements et les entreprises. Ces normes mettent principalement l'accent sur les systèmes de gestion et les incitations qui encouragent un meilleur usage des ressources environnementales. Cet article étudie un tel système, où la rémunération pourrait dépendre en partie des conclusions d'un audit environnemental. On trouve que le salaire versé après la tenue d'un audit devrait varier davantage que celui versé lorsqu'il n'y a pas eu d'audit. On montre aussi que la décision d'effectuer un audit environnemental et le niveau du salaire espéré dans ce cas dépendent essentiellement de la relation entre la prudence (ou la précaution) et l'aversion pour le risque du manager. On montre finalement que l'insertion d'audits environnementaux au sein des systèmes managériaux usuels poussera certainement un manager à se préoccuper davantage de l'environnement,0501s la redistribution de l'effort de ce dernier pourrait bien ne pas survenir au détriment de ses activités principales au sein de l'entreprise. On discute enfin brièvement du rôle et de l'intérêt du décideur public dans l'élaboration et la promotion de nouvelles normes pour les audits.

Suggested Citation

  • H. Landis Gabel & Bernard Sinclair-Desgagné, 1996. "Environmental Auditing in Management Systems and Public Policy," CIRANO Working Papers 96s-21, CIRANO.
    • Handle: RePEc:cir:cirwor:96s-21
    as

    Download full text from publisher

    File URL: https://cirano.qc.ca/files/publications/96s-21.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Dilip Mookherjee & Ivan Png, 1989. "Optimal Auditing, Insurance, and Redistribution," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 104(2), pages 399-415.
    2. Milgrom, Paul & Shannon, Chris, 1994. "Monotone Comparative Statics," Econometrica, Econometric Society, vol. 62(1), pages 157-180, January.
    3. Kimball, Miles S, 1990. "Precautionary Saving in the Small and in the Large," Econometrica, Econometric Society, vol. 58(1), pages 53-73, January.
    4. Karen Palmer & Wallace E. Oates & Paul R. Portney & Karen Palmer & Wallace E. Oates & Paul R. Portney, 2004. "Tightening Environmental Standards: The Benefit-Cost or the No-Cost Paradigm?," Chapters, in: Environmental Policy and Fiscal Federalism, chapter 3, pages 53-66, Edward Elgar Publishing.
    5. Kim, Son Ku, 1995. "Efficiency of an Information System in an Agency Model," Econometrica, Econometric Society, vol. 63(1), pages 89-102, January.
    6. Baiman, S & Demski, Js, 1980. "Economically Optimal Performance Evaluation And Control-Systems," Journal of Accounting Research, Wiley Blackwell, vol. 18, pages 184-220.
    7. Townsend, Robert M., 1979. "Optimal contracts and competitive markets with costly state verification," Journal of Economic Theory, Elsevier, vol. 21(2), pages 265-293, October.
    8. Sinclair-Desgagne, Bernard, 1994. "The First-Order Approach to Multi-signal Principal-Agent Problems," Econometrica, Econometric Society, vol. 62(2), pages 459-466, March.
    9. Ronald A. Dye, 1986. "Optimal Monitoring Policies in Agencies," RAND Journal of Economics, The RAND Corporation, vol. 17(3), pages 339-350, Autumn.
    10. Michael E. Porter & Claas van der Linde, 1995. "Toward a New Conception of the Environment-Competitiveness Relationship," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 97-118, Fall.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Marie-Cécile Fagart & Bernard Sinclair-Desgagné, 2002. "Auditing Policies and Information Systems in Principal-agent Analysis," Cahiers de recherche 02-02, HEC Montréal, Institut d'économie appliquée.
    2. George Georgiadis & Balazs Szentes, 2020. "Optimal Monitoring Design," Econometrica, Econometric Society, vol. 88(5), pages 2075-2107, September.
    3. H. Landis Gabel & Bernard Sinclair-Desgagné, 1994. "Environmental Audits and Incentive Compensation," CIRANO Working Papers 94s-19, CIRANO.
    4. Jeffrey M. Lacker, 1989. "Limited commitment and costly enforcement," Working Paper 90-02, Federal Reserve Bank of Richmond.
    5. Alberto Bisin & Piero Gottardi & Adriano A. Rampini, 2008. "Managerial Hedging and Portfolio Monitoring," Journal of the European Economic Association, MIT Press, vol. 6(1), pages 158-209, March.
    6. de la Fuente, Angel & Marin, JoseMaria, 1996. "Innovation, bank monitoring, and endogenous financial development," Journal of Monetary Economics, Elsevier, vol. 38(2), pages 269-301, October.
    7. Strausz, Roland, 2006. "Buried in paperwork: Excessive reporting in organizations," Journal of Economic Behavior & Organization, Elsevier, vol. 60(4), pages 460-470, August.
    8. Bernard Sinclair-Desgagné & Marie-Cécile Fagart, 2004. "Auditing policies and information," Econometric Society 2004 North American Winter Meetings 86, Econometric Society.
    9. Kaplow, Louis & Shavell, Steven, 1994. "Optimal Law Enforcement with Self-Reporting of Behavior," Journal of Political Economy, University of Chicago Press, vol. 102(3), pages 583-606, June.
    10. Dionne, Georges & Harrington, Scott, 2017. "Insurance and Insurance Markets," Working Papers 17-2, HEC Montreal, Canada Research Chair in Risk Management.
    11. Marie-Cécile Fagart & Bernard Sinclair-Desgagné, 2007. "Ranking Contingent Monitoring Systems," Management Science, INFORMS, vol. 53(9), pages 1501-1509, September.
    12. Peter-J. Jost, 2023. "Auditing versus monitoring and the role of commitment," Review of Accounting Studies, Springer, vol. 28(2), pages 463-496, June.
    13. Guillaume Plantin & Jean Tirole, 2018. "Marking to Market versus Taking to Market," American Economic Review, American Economic Association, vol. 108(8), pages 2246-2276, August.
    14. Newman, Andrew F., 2007. "Risk-bearing and entrepreneurship," Journal of Economic Theory, Elsevier, vol. 137(1), pages 11-26, November.
    15. Ying Yan, 1997. "Credit rationing, bankruptcy cost, and the optimal debt contract for small business," Working Papers (Old Series) 9702, Federal Reserve Bank of Cleveland.
    16. M. Martin Boyer, 2004. "On the Use of Hierarchies to Complete Contracts when Players Have Limited Abilities," CIRANO Working Papers 2004s-41, CIRANO.
    17. Rasmusen, E., 1994. "A Model of Negotiation, not Bargainig," Papers 94-007, Indiana - Center for Econometric Model Research.
    18. Gao, Pingyang, 2013. "A measurement approach to conservatism and earnings management," Journal of Accounting and Economics, Elsevier, vol. 55(2), pages 251-268.
    19. Li, Anqi & Yang, Ming, 2020. "Optimal incentive contract with endogenous monitoring technology," Theoretical Economics, Econometric Society, vol. 15(3), July.
    20. Ying Yan, 1996. "Credit Rationing, Bankruptcy Cost, and Optimal Debt Contract for Small Business," Finance 9612003, University Library of Munich, Germany.

    More about this item

    Keywords

    Multi Task Principal Agent Analysis; Environmental Auditing; Risk Aversion; Prudence; Analyse principal-agent multi-tâches; Audits environnementaux; Aversion pour le risque; Prudence;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • M49 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Other

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cir:cirwor:96s-21. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Webmaster (email available below). General contact details of provider: https://edirc.repec.org/data/ciranca.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.