Self-Policing and the Environment: Predicting Self-Disclosure of Clean Air Act Violations Under the U.S. Environmental Protection Agency's Audit Policy

Abstract

ABSTRACT The U.S. Environmental Protection Agency's Self-Policing or Audit Policy waives or reduces penalties when regulated entities voluntarily discover, disclose, and correct environmental violations. This study uses a case-control design to determine if traditional regulatory efforts, organizational factors, and/or case characteristics are associated with the odds of disclosing a Clean Air Act violation under the policy. The results suggest that Audit Policy use is related to within-industry regional inspection levels. We find no evidence that company size directly influences Audit Policy use. Instead, company size appears to be mediated by case characteristics. Specifically, we suggest that larger companies may be more likely to use the Audit Policy because they violate multiple environmental laws. This finding indicates that the Audit Policy may expand the total number of violations that ultimately become known to the U.S. Environmental Protection Agency.