Social and Behavioral Sciences Commons^™

Do Environmental Audits Improve Long-Term Compliance: Evidence From Manufacturing Facilities In Michigan, Mary F. Evans, Lirong Liu, Sarah L. Stafford

CMC Faculty Publications and Research

Using a unique facility-level dataset from Michigan, we examine the effect of environmental auditing on manufacturing facilities’ long-term compliance with U.S. hazardous waste regulations. We also investigate the factors that affect facilities’ decisions to conduct environmental audits and whether auditing in turn affects the probability of regulatory inspections. We account for the potential endogeneity of our audit measure and the censoring of our compliance measure using a censored trivariate probit, which we estimate using simulated maximum likelihood. We find that larger facilities and those subject to more stringent regulations are more likely to audit; facilities with poor compliance records are …