Events

Ms. Mengjie Yang
Ph.D. Candidate in Accounting
School of Accountancy
Singapore Management University

I examine whether and how firms incorporate retail customers’ environmental preferences into their pollution decisions. Leveraging staggered revelations of firms’ envirom11ental negative news and the granularity of household grocery shopping records, I quantify local customers’ heterogeneous environmental preferences based on the extent of product sales declines following the news events. In line with finns factoring in rewards and penalties from customers and strategically reducing pollution, I find a significant improvement in air quality near event firms’ facilities located in markets where local customers reveal the highest environmental preference. The effect is more pronounced when news events are more salient and ex-ante information frictions between finns and customers are greater. Furthermore, I find no changes in firm-level pollution, and air quality significantly worsens in facilities located in markets where customers have low environmental preferences, corroborating firms’ pollution-shifting strategy. Overall, my findings shed light on retail customers’ role in firms’ environmental resource allocation.