Cross-Ownership and Green Managerial Delegation Contracts in a Mixed Oligopoly

This study examines strategic interactions in green managerial delegation contracts with environmental corporate social responsibility (ECSR). We consider a mixed oligopoly under cross-ownership between the private firms and compare three cases of delegation contracts within public firms—no public delegation, profit-weighted delegation, and welfare-weighted delegation. We find that private managers always undertake ECSR, whereas public managers do so when there is severe environmental damage. We also find that the ECSR incentives for welfare-weighted public managers are always lower than for their profit-weighted counterparts, which leads to lower environmental damage and greater social welfare. Finally, we show that welfare-weighted public delegation increases the private firm’s ECSR compared to no public delegation, which is reversed in the profit-weighted variant. Our findings suggest that the government should design an environmental incentive scheme that induces private managers to behave more aggressively in abatement activities as the degree of cross-ownership increases