Publications
Publications
- 9 May 2011 - 11 May 2011
How Firms Respond to Mandatory Information Disclosure
By: Anil Doshi, Michael Toffel and Glen W. S. Dowell
Abstract
When new institutional pressures arise, which organizations are particularly likely to resist or
acquiesce? When subjected to new information disclosure mandates, an increasingly popular form
of market-based government regulation, which types of organizations are more likely to
subsequently improve their performance in ways that meet policy makers’ objectives? This study
addresses these questions. We build on institutional theory to propose that several organizational
characteristics moderate how organizations respond to institutional pressure, and provide among
the first evidence characterizing organizations’ heterogeneous responses to information disclosure
regulations. We hypothesize that establishments more proximate to their headquarters will have
greater access to their capabilities and be subjected to increased monitoring, both of which will
cause these establishments to be more responsive to institutional pressures. We also hypothesize that
establishment size and ownership structure increase the salience of institutional pressures, which
increases organizations’ responsiveness to institutional pressures. We test our hypotheses in the
context of one of the most prominent disclosure programs, the U.S. Environmental Protection
Agency’s Toxic Release Inventory. We examine how thousands of establishments responded to
the regulator’s requiring them to publicly disclose emissions of hundreds of toxic chemicals, and
take advantage of an exogenous shock that occurred when the agency expanded the number of
chemicals required to be reported. We find that establishments that improved more rapidly were
more proximate to their headquarters, smaller than average, and were owned by private firms. We
also found that establishments near their headquarters and private firms more aggressively reduced
particularly harmful emissions. Finally, we found that large firms reduced their overall emissions,
do not significantly reduce particularly harmful emissions, relative to smaller firms. These results
may provide evidence for the characteristics of “good citizen” or “green washing” firms. We
highlight the important implications of our results both for the further development of institutional
theory and for information disclosure policy makers as well as those who use such disclosed
information.
Keywords
Corporate Disclosure; Governing Rules, Regulations, and Reforms; Environmental Regulation; Corporate Social Responsibility and Impact; Organizational Change and Adaptation
Citation
Doshi, Anil, Michael Toffel, and Glen W. S. Dowell. "How Firms Respond to Mandatory Information Disclosure." Paper presented at the Alliance for Research on Corporate Sustainability Annual Research Conference, Philadelphia, PA, May 9–11, 2011.