Cross-Ownership, Green Managerial Delegation, and Emission Taxation

Abstract

This paper analyzes the effects of cross-ownership on green managerial delegation contracts in a Cournot duopoly market with emission tax policy. We show that higher cross-ownership will always exacerbate environmental degradation and diminish societal welfare, even with green managerial delegation. Compared with sales delegation, green managerial delegation under such ownership always yields higher environmental damage and lower social welfare. Compared to concurrent regulation, noncommitted emission taxation always leads to lower environmental damage and higher social welfare, although green managerial delegation will not be chosen in the latter. Our findings have important policy implications.