An examination of accounting and auditing issues related to strategic environmental initiatives

Although corporate environmental accountability is receiving unprecedented attention in the United States from policy makers, the capital market, and the public at large, extant research is limited in its examination of the implications of strategic corporate environmental initiatives on accounting and auditing. The purpose of my dissertation is to address these implications by examining the association between firm environmental initiatives and audit fees, capital expenditures, and earnings quality using multivariate regression analysis. I find that firms engaged in more strategic environmental initiatives tend to have significantly higher audit fees and capital expenditures, and significantly lower levels of earnings manipulation measured using discretionary accruals. These results support the notion that auditors do recognize the importance of environmental initiatives when conducting the year-end financial statement audit, an idea that positively reflects upon the auditor’s monitoring role. The results also demonstrate the increased amount of capital resources required to participate in strategic environmental initiatives, an anecdotal notion that had yet to be empirically supported. This empirical support provides valuable insights on how environmental initiatives materially impact corporate financial statements. Finally, my results extend the extant literature by demonstrating that the superior financial performance reported by environmentally active firms is less likely driven by earnings manipulation by management, and by implication, more likely a result of real economic gains. Taken together, my dissertation establishes a strong and timely foundation for current and future research to explore corporate environmental initiatives in the United States and globally, a topic increasingly gaining momentum in today’s more eco-conscious world.^

Market valuation of environmental performance

This research investigated the general association between corporate environmental performance and the firms’ annual returns independent of any particular environmental event. The association analysis was based on the most recent environmental data for the years 2006, 2007, and 2008. The results indicated that while some environmental variables were significantly associated with firms’ returns, the majority were not. The results also indicated that environmental concerns were more likely to be associated with increase in the firm value than were environmental strengths; however, there were no mean differences between firms whose environmental performance increased as compared with those whose performance deteriorated. Overall, the results provided support for the perspective that environmental strengths require firm expenditures that place additional financial burdens on firms, resulting in lower stock returns.^

Putting the Green in Bureaucracy: Practices of Quantification and Valuation in Environmental Regulation

While researchers have devoted considerable attention to exploring the ways that intentional environmental reregulation creates new avenues for capital accumulation (e.g. Smith, 2007; Castree, 2008), it remains somewhat unclear how the less grandiose day-to-day work of environmental regulators may also help create new sources of ecological value. Through an ethnographic study of environmental regulators tasked with enforcing key environmental laws, I shed light on the subtle ways that rule interpretation and scientific practice structure the frames, models, and methodologies regulators use to enact “best professional judgments” about ecological systems, and ultimately to assign particular values to nature. I also show the ways that non-human nature pushes back against such assessments, which in combination with the interpretive work of environmental regulation, opens spaces of conflict in at least two arenas: one focused on modes of quantification, where actors contend between economistic, ecological, statutory, and moral frames for making value assessments; and one focused on presentations of value, where actors contend between value assessments that best represent their self-defined interests. The ‘value settlements’ environmental regulators reach in these contested spaces allow processes of commensuration to proceed, and ultimately make nature legible for capitalization and exchange. Accounting for the ways that these basic regulatory practice help create ecological value is essential for creating a fuller picture of the ways capital and natural capital relate.

Environmental Dynamics of Dissolved Black Carbon in Aquatic Ecosystems

Black carbon (BC), the incomplete combustion product from biomass and fossil fuel burning, is ubiquitously found in soils, sediments, ice, water and atmosphere. Because of its polyaromatic molecular characteristic, BC is believed to contribute significantly to the global carbon budget as a slow-cycling, refractory carbon pool. However, the mass balance between global BC generation and accumulation does not match, suggesting a removal mechanism of BC to the active carbon pool, most probable in a dissolved form. The presence of BC in waters as part of the dissolved organic matter (DOM) pool was recently confirmed via ultrahigh resolution mass spectrometry, and dissolved black carbon (DBC), a degradation product of charcoal, was found in marine and coastal environments. However, information on the loadings of DBC in freshwater environments and its global riverine flux from terrestrial systems to the oceans remained unclear. The main objectives of this study were to quantify DBC in diverse aquatic ecosystems and to determine its environmental dynamics. Surface water samples were collected from aquatic environments with a spatially significant global distribution, and DBC concentrations were determined by a chemical oxidation method coupled with HPLC detection. While it was clear that biomass burning was the main sources of BC, the translocation mechanism of BC to the dissolved phase was not well understood. Data from the regional studies and the developed global model revealed a strong positive correlation between DBC and dissolved organic carbon (DOC) dynamics, indicating a co-generation and co-translocation between soil OC and BC. In addition, a DOC-assistant DBC translocation mechanism was identified. Taking advantage of the DOC-DBC correlation model, a global riverine DBC flux to oceans on the order of 26.5 Mt C yr-1 (1 Mt = 1012 g) was determined, accounting for 10.6% of the global DOC flux. The results not only indicated that DOC was an important environmental intermediate for BC transfer and storage, but also provided an estimate of a major missing link in the global BC budget. The ever increasing DBC export caused by global warming will change the marine DOM quality and may have important consequences for carbon cycling in marine ecosystem.