Corporate Governance and Pollution Externalities of Public and Private Firms

The number of U.S. publicly traded firms has halved in 20 years. How will this shift in ownership structure affect the economy’s externalities? Using comprehensive data on greenhouse gas emissions from 2007 to 2016, we find that independent private firms are less likely to pollute and incur EPA penalties than are public firms, and we find no differences between private sponsor-backed firms and public firms, controlling for industry, time, location, and a host of firm characteristics. Within public firms, we find a negative association between emissions and mutual fund ownership and board size, suggesting that increased oversight may decrease externalities.