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Relationship between managers' risk preference and firms' compliance with environmental regulations: Evidence in Vietnam

By Pham Thi Lan Trinh (VNP 23)

Supervisor: Dr. Pham Khanh Nam

Abstract

Vietnam has had high economic growth over the last decade; we have faced the quickly decreasing in environmental quality especially in the big cities. There has been a large of researches on estimating the determinants of firm’s environmental performance. Most of them focus on financial incentives or managerial incentives, only a few of them focus on the firm’s characteristics and manager’s psychological behavior such as risk attitude. This area of study is potentially important but has not been covered thoroughly in literature, especially for environmental compliance behavior in Vietnam. This study try to fill this gap and it aims to answer the question of whether there is relationship between managers’ risk preference and firms’ environmental compliance decision. It applies the cross-sectional analysis using bivariate probit model, which runs the regressions of two indicators (of dependent variable) at the same time. The results suggest that there is evidence that managers’ risk attitude (in financial sector) affect firms’ decision of complying with environmental regulations. In addition, other outside pressures influence the firms’ environmental performance level also. The regulators should consider managers’ risk preference information comprise with other firms characteristics and external factors to have the efficient policies.

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