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Using data from a sample of U.S. industrial facilities subject to the federal Clean Air Act from 1993 to 2003, this article theorizes and tests the conditions under which organizations' symbolic commitments to self-regulate are particularly likely to result in improved compliance practices and outcomes. We argue that the legal environment, particularly as it is constructed by the enforcement activities of regulators, significantly influences the likelihood that organizations will effectively implement the self-regulatory commitments they symbolically adopt. We investigate how different enforcement tools can foster or undermine organizations' normative motivations to self-regulate. We find that organizations are more likely to follow through on their commitments to self-regulate when they (and their competitors) are subject to heavy regulatory surveillance and when they adopt self-regulation in the absence of an explicit threat of sanctions. We also find that historically poor compliers are significantly less likely to follow through on their commitments to self-regulate, suggesting a substantial limitation on the use of self-regulation as a strategy for reforming struggling organizations. Taken together, these findings suggest that self-regulation can be a useful tool for leveraging the normative motivations of regulated organizations but that it cannot replace traditional deterrence-based enforcement.

This paper exploits a natural quasi-experiment to isolate the effects that were uniquely due to the Sarbanes—Oxley Act (SOX): U.S. firms with a public float under $75 million could delay Section 404 compliance, and foreign firms under $700 million could delay the auditor's attestation requirement. As designed, Section 404 led to conservative reported earnings, but also imposed real costs. On net, SOX compliance reduced the market value of small firms.

Voluntary programs have become widespread tools for governments and nongovernmental actors looking to improve industry's environmental and regulatory performance. Voluntary programs can be conceptualized as club goods that provide nonrival but potentially excludable benefits to members. For firms, the value of joining a green club over taking the same actions unilaterally is to appropriate the club's positive brand reputation. Our analysis of about 3,700 U.S. facilities indicates that joining ISO 14001, an important nongovernmental voluntary program, improves facilities' compliance with government regulations. We conjecture that ISO 14001 is effective because its broad positive standing with external audiences provides a reputational benefit that helps induce facilities to take costly progressive environmental action they would not take unilaterally.

The prevailing neoclassical economic view in tax-behavior research is that trust is good, but control is better. The advice for combating tax evasion is to deter illegal behavior with rigid audits and harsh fines. But control and punishment may have unintended side effects; therefore, psychological variables (e.g., attitudes toward taxation, social norms, and perceived fairness) are receiving increased attention. The slippery-slope framework integrates both economic and psychological perspectives on tax compliance. It assumes that taxpayers abide by the law either because they fear detection and fines (enforced compliance) or because they feel an obligation to honestly contribute their share (voluntary cooperation). Whereas enforced compliance depends on the power of authorities, voluntary cooperation originates from taxpayers' trust in the authorities. A growing body of empirical research supports this framework's assumptions. The psychological approach to tax behavior has led to a change in tax authorities' practices for regulating citizen behavior. Under the labels of \"enhanced relationships,\" \"horizontal monitoring,\" and \"fair-play initiatives,\" several European countries are advancing cooperative strategies with taxpayers.

The primary objective of the current study is to empirically reexamine the relation between material weaknesses in internal control (MW) and cost of equity (CE). We direct particular emphasis to the way non-remediation, as well as remediation, of MW affects a firm's CE. This study utilizes a dataset that contains a large sample of second-year MW non-remediation cases, as well as third-, fourth-, and fifth-year nonremediation cases. The findings provide evidence that reporting MW, absent any remediation, in multiple consecutive years has a significant negative impact on CE. However, the current study also shows that the market views favorably a reduction in the number of MW (i.e., partial remediation). Our study helps to reconcile conflicting results in the literature devoted to the relation between MW and CE.

Regulatory agencies are increasingly establishing voluntary self-reporting programs both as an investigative tool and to encourage regulated firms to commit to policing themselves. We investigate whether voluntary self-reporting can reliably indicate effective self-policing efforts that might provide opportunities for enforcement efficiencies. We find that regulators used self-reports of legal violations as a heuristic for identifying firms that are effectively policing their own operations, shifting enforcement resources away from those that voluntarily disclose. We also find that these firms that voluntarily disclosed regulatory violations and committed to self-policing improved their regulatory compliance and environmental performance, which suggests that the enforcement relief they received was warranted. Collectively, our results suggest that self-reporting can be a useful tool for reliably identifying and leveraging the voluntary self-policing efforts of regulated companies.

As part of a recent trend toward more cooperative relations between regulators and industry, novel government programs are encouraging firms to monitor their own regulatory compliance and voluntarily report their own violations. In this study, we examine how regulatory enforcement activities influence organizations' decisions to self-police. We created a comprehensive data set for the \"Audit Policy,\" a United States Environmental Protection Agency program that encourages companies to self-disclose violations of environmental laws and regulations in exchange for reduced sanctions. We find that facilities are more likely to self-disclose if they were recently subjected to one of several different enforcement measures and if they were provided with immunity from prosecution for self-disclosed violations.

This article adds to the regulatory compliance literature through the theoretical development and experimental testing of two endogenous audit mechanism that use contemporaneous relative comparisons, based on disclosed information or imperfect signals of compliance effort, to generate a compliance competition among agents. This type of audit mechanism has some advantages over the more widely studied dynamic audit mechanisms that condition an agent's audit probability on past compliance, and provides an alternative explanation for the stylized fact, in many settings, that most agents are compliant most of the time even though audit rates and expected penalties are low.

Public food safety authorities in Europe and elsewhere have recently developed forms of coordination and collaboration with private compliance systems in the monitoring and enforcement of public food safety laws. Such policies bring with them the risk of regulatory capture, loss of transparency and fuzzy accountability relationships. In this paper we analyse how the Netherlands Food and Consumer Product Safety Authority (NVWA) assesses and monitors the functioning of private food safety control systems so it can use these private systems in its own enforcement activities. We do so by discussing two national private systems that have been formally accepted by the NVWA and are as such subject to its meta-control. The article examines the safeguards that the public enforcement agency uses while coordinating its own activities with private food safety controls, the advantages and risks involved in this strategy, and the extent to which this policy can be improved. From this we draw lessons for public agencies elsewhere willing to engage with private compliance mechanisms. The study is based on the analysis of policy documents, public and private regulation and open-ended interviews with representatives of the public and private sector in the Netherlands.

Sociolegal scholars suggest that regulatory encounters often are occasions for displaying a surface compliance decoupled from day-to-day practice. Yet ethnographic data from five highly regulated HIV clinics show that regulatory encounters open opportunities both for ritualism and—surprisingly—for transcending ritualism. Using a theatrical analogy, we argue that improv performance is the technology that enables regulatory inspectors and clinic staff to transcend ritualism. As regulatory encounters unfold, clinics' carefully prepared performances sometimes change into more cooperative interactions where inspectors and regulatees hash out details about how rules will be applied and even work together on reports for the regulators' supervisors. By \"performing together,\" regulatory inspectors gain access to the clinic's backstage where they can assess clinic workers' deeper conformity to ethical and scientific norms. But such joint performances are less likely where cultural divides and material scarcity make it difficult for clinic staff to gain inspectors' trust.