The Determinants of an Environmentally Responsive Firm: An Empirical Approach

Abstract

Our empirical results indicate that a firm's formulation of an environmental plan is positively influenced by customer pressure, shareholder pressure, government regulatory pressure, and neighborhood and community group pressure but negatively influenced by other lobby group pressure sources and a firm's sales-to-asset ratio. Firms which view environmental issues as important in the next 5 years are also more likely to have a plan. Relative to the manufacturing sector, firms in the natural resource sector are more likely to formulate environmental plans while firms in the service sector are less likely to have plans. Our results provide insight into how firms react to environmental issues. They also offer policymakers a list of determinants which can be used either as an alternative or complement to environmental regulation.