Corporate Disclosure of Environmental Liability Information: Theory and Evidence*

Abstract. The decision to disclose information concerning a firm's environmental liabilities is modeled as a sequential game involving the firm, a capital market, and outside stakeholders who can impose proprietary (political) costs on the firm. A partial disclosure equilibrium is derived in which firms reveal information strategically, maximizing the share-value net of expected political costs. Inherent uncertainty regarding the existence and size of the liabilities creates a setting where outsiders are uncertain if management is informed about these liabilities, so firms can plausibly withhold “bad news”, that is, they do not disclose liabilities that exceed a threshold level. Three novel hypotheses are that a firm is more likely to disclose as (1) its pollution propensity increases, (2) outsiders' knowledge of its environmental liabilities increases, and (3) the risk of incurring proprietary costs decreases. Empirical support is found for the hypotheses, based on the accounting disclosures made by sample firms selected from the records of the Ontario Ministry of the Environment and Energy. Improved accounting and auditing standards for environmental disclosure would build on at least three implications of the study:

• 1 To the extent that inherent uncertainty leaves managers with discretion as to what to disclose, the partial disclosure equilibrium result suggests that not all firms will comply with disclosure standards.
• 2 Publishing broad environmental performance indicators for companies in nonaccounting outlets would increase public awareness of a manager's private information endowment, making voluntary accounting disclosures of the liabilities more likely.
• 3 If a significant decline in stakeholder tolerance of pollution occurs, the expected proprietary costs of disclosing increase, and companies become less likely to disclose.

     

Determinants of internal and external R&D: Some Dutch evidence

Summary Innovating firms can choose to engage in either internal or external R&D, or in both. In the current study, we shall examine internal and external R&D separately to determine empirically the market structure characteristics explaining the external R&D share and the differences in market structure determinants between internal and external R&D. Our results indicate that a government policy that aims at stimulating technological progress by offering external research facilities is particularly interesting for smaller, capital-intensive firms operating in less concentrated markets.We would like to thank Alfred Kleinknecht for providing the R&D data and Kees Bakker and Yvonne Prince for providing the market structure data. We thank Alfred Kleinknecht, Bart Nooteboom and an anonymous referee for their comments and suggestions We acknowledge a research grant from the Stichting KMO Fonds.     

Does migration arbitrage regional labor market differentials?

"This paper examines the determinants of regional migration [in the United States] in the 1980s using a place-to-place migration model in which migration flows depend upon the relative economic opportunities in the origin and destination regions. Using the results of the model, we then examine the potential role for migration in diffusing the economic pressures associated with disparate regional economic growth. Although the results reinforce the notion that divergent regional growth was an impetus to migration in the 1980s, estimates of the employment status of movers suggest that the true effects of migration on unemployment differentials may be quite small."     

You're fired! What to do, how to cope, finding a new job

If you find yourself out of a job, do not despair. It has happened to the best and the brightest; you are not alone. If you have never lost a job consider yourself fortunate, but do not become complacent. It very well could happen to you sometime soon. Be prepared. Watch for the signs. And if it happens, remain the professional you have always been. There is always another, and probably better, job awaiting you.     

Incentives and cost containment in primary care physician reimbursement

The goal of capitation is to place gatekeepers at financial risk for the services the deliver. However, third party payers should provide gatekeepers with some type of protection against random and systematic risk transfer. Gatekeeper physicians' other alternative is to reduce this risk on their own by actively marketing services to healthier individuals and creating barriers to care for their sicker patients. Thus, the proper balance of risk transfer will result in the most cost-efficient, quality gatekeeper networks. However, even with the right balance of risk transfer, capitation may provide incentive for some physicians to withhold necessary services to further increase their profit margins-making quality of care a key concern. Thus, practice guidelines should be developed to ensure quality is not affected. These guidelines afford explicit criteria on how gatekeepers should respond in specific clinical situations.     

Employee benefit packages for part-time workers

To successfully recruit and retain part-time workers in the decade ahead, managers will need to design more attractive employee benefit packages. This article examines which benefits part-time workers receive and value the most and which benefits they would like to receive.     

Nursing home reform: its legislative history and economic impact upon nursing homes

This article presents a legislative history of Subtitle C of the Omnibus Budget Reconciliation Act of 1987 (OBRA '87). It articulates the philosophy behind the act and describes the economic and organizational impact on the nursing home industry. Additionally, data from Connecticut nursing homes are analyzed to determine the factors that affect the costs of complying with OBRA.     

The cost of treating injured workers: the changing workers' compensation landscape

To better understand the impact of changing health care delivery on the workers' compensation system and the cost of treating injured workers, the author examines the program within the context of recent environmental changes--including the likely impact of managed care.     

Health care costs in workers' compensation

Although the costs of both the medical and indemnity components of workers' compensation have increased substantially in the past several years, the costs of medical benefits grew far more dramatically.