A Study of Environmental Management Investment Allocation

Abstract

The 21st century is a new century of environmental protection. Environmental protection is one of the most important subject matters yet to come. Moreover, as the public pays more attention to environmental problems, enterprises should increase their investment in environmental management. Therefore, determining the investment level for environmental management and allocating the investment to associated environmental management activities has become a major task. The principal and agent theory and sales response functions are used for analysis in this research. The allocation of capital investment in environmental management is found to have significant impact on the aggregate sales response, aggregate profit and investment level. Therefore, in preparing the budget for environmental management, enterprises should focus on investment allocation decisions, determine the investment level and allocation method using integrated means, and apply submarket data in the allocation decision‐making process. In other words, in setting the investment level, executive management should take managers’ willingness into consideration. In allocating capital investment, managers should identify the optimal allocation method based on submarket characteristics.

Factors that influence corporate environmental behavior: empirical analysis based on panel data in China

“…Specifically, Tien et al (2008) provided an integrated decision-making method (i.e., the optimal allocation decision) relative to the decision-making in respect of environmental investment levels and found that enterprise sales and profits responded better to the optimal allocation than to the allocation by ratio. Furthermore, increasing the consumers' recognition and approval of environmental investment, environmental investment efficiency, and production efficiency will be conducive to enhancing the environmental investment level (Tien et al, 2008).…”

“…Furthermore, increasing the consumers' recognition and approval of environmental investment, environmental investment efficiency, and production efficiency will be conducive to enhancing the environmental investment level (Tien et al, 2008).…”