Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/327706 
Year of Publication: 
2025
Series/Report no.: 
CESifo Working Paper No. 12096
Publisher: 
Munich Society for the Promotion of Economic Research - CESifo GmbH, Munich
Abstract: 
We provide a theoretical micro foundation for how much pollution (negative externalities) a firm will internalize based on the ownership distribution of its shareholders. Small shareholders, compared to large ones, want the firm to spend more on avoiding pollution since they suffer less profit loss for the same environmental benefit. In particular, if a shareholder holds a share of 1/N, where N is the population in society, that shareholder's preferences align with a social planner's. Three theoretical predictions arise. First, small shareholders will systematically vote for a greener corporate profile. Second, firms with a smaller weighted median shareholder will pollute less. Third, countries with concentrated corporate wealth holdings and/or more individualized firm ownership pollute more. This implies that standard models of externalities in environmental economics and macroeconomics containing representative agents are either internally inconsistent or not fully specified.
Subjects: 
firm ownership
shareholders
voting
pollution
JEL: 
Q50
Q52
G32
Document Type: 
Working Paper
Appears in Collections:

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.