Journal of Finance and Economics

Journal of Finance and Economics

ISSN: 2291-4951 (Print)    ISSN: 2291-496X (Online)

Volume 9 (2018), No. 1, Pages 26-40

DOI: 10.12735/jfe.v9n1p26

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The Influence of Financial Status on the Safety Performance of Regulated Companies: The Role of Enforcement

Dietrich Earnhart1  Kathleen Segerson2 

1Department of Economics, University of Kansas, Center for Economic Research and Graduate Education – Economics Institute, USA
2Department of Economics, University of Connecticut, USA


To Cite this Article     Article Views: 600     Downloads: 501  Since deposited on 2018-03-21


A better understanding of the link between a firm’s financial status and its regulated performance can help to improve the design of regulatory regimes and lead to more efficient regulatory structures. To date, however, the literature investigating this link has not considered the role that regulatory enforcement plays in determining how financial status affects performance. This paper analyzes how regulatory enforcement affects the relationship between financial status and the safety performance of regulated firms. It examines a particular form of safety performance, namely, the environmental performance of companies regulated under environmental protection laws. In particular, our study explores this effect in the context of the regulation of water pollution using data on wastewater discharges from U.S. chemical manufacturing facilities for the years 1995 to 2001. The results suggest that enforcement in general can play an important role in shaping the effects of financial status on safety performance.

JEL Classifications: D21, D22, G30, K32, K42, Q53, Q58

Keywords: safety performance, protection effort, financial, enforcement, penalties, inspection

To Cite this Article: Earnhart, D., & Segerson, K. (2018). The influence of financial status on the safety performance of regulated companies: The role of enforcement. Journal of Finance and Economics, 9(1), 26-40.

Copyright © D. Earnhart & K. Segerson

Creative Commons License
This article is published under license to Science and Education Centre of North America. This is an Open Access article distributed under the terms of the Creative Commons Attribution 4.0 International License.

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The Influence of Financial Status on the Safety Performance of Regulated Companies: The Role of Enforcement