Common ownership and environmental Corporate Social Responsibility

Abstract

This study theoretically examines the effect of common ownership on emission levels when firms can use environmental CSR as a commitment device to soften competition. Specifically, we investigate how common ownership (or the extent of cooperation in an industry) affects firms’ voluntary commitment to emission restrictions and emissions abatement activities in an oligopoly. The results show 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.