Outsourcing Climate Change

Outsourcing Climate Change

Rui Dai, Rui Duan, Hao Liang, Lilian Ng

Series number :

Serial Number: 
723/2021

Date posted :

January 08 2021

Last revised :

January 15 2021
SSRN Share

Keywords

  • Outsourcing • 
  • Emissions • 
  • Import • 
  • Pricing and Welfare Implications

This paper exploits newly available information on firms’ direct (own production) and indirect (supplier-generated) carbon emission intensities and transaction-level imports to conduct an in-depth analysis of whether and how U.S. firms address climate change.

We find robust evidence that when firms increase their imports, their own emissions fall with a corresponding rise in supplier generated emissions. Several quasi-natural experiments further support this pivotal evidence that U.S. firms outsource some of their pollutions abroad. We show that firms, management, and directors with desires to maintain high environmental standings and environmentally-conscious customers and investors play a role in corporate environmental policies. Finally, firms with more imported emissions tend to have higher reputational risks and larger future stock returns but are less incentivized to develop clean technologies.

Authors

Real name:
Rui Dai
Real name:
Rui Duan
Dr.
Real name:
Research Member
Singapore Management University, Lee Kong Chian School of Business
Real name:
Research Member
Schulich School of Business, York University