We examine the interrelationships among executive compensation, environmental‐social‐governance‐based (ESG) sustainable compensation policy, carbon performance and market value. Using one of the ...largest datasets to date, consisting of 4379 firm‐year observations, covering a period of 15 years (2002–2016) from 13 industrialized European countries and insights from neo‐institutional theory (NIT), our findings are fourfold. First, our results suggest that process‐oriented carbon performance is positively associated with market value, whereas actual carbon performance has no effect on market value. Second, we show that the market value–process‐oriented carbon performance nexus is moderated by executive compensation. Third, our results indicate that executive compensation has a positive effect on process‐oriented carbon performance, but has no similar effect on actual carbon performance. Fourth, we show that the process‐oriented carbon performance–executive compensation nexus is reinforced for companies that adopt ESG‐based sustainable compensation policy. Our results are generally robust to controlling for governance mechanisms, alternative measures/estimations and endogeneities. Overall, our evidence supports the legitimization aspect of NIT and suggests that the market tends to reward firms with superior process‐oriented carbon performance instead of undervaluing firms with excessive actual carbon emissions. This implies that firms appear to use incentive‐based mechanisms to symbolically improve their process‐oriented carbon performance without substantively improving their actual carbon performance.
We contribute to the business strategy and the environment literature by investigating the influence of corporate sustainability initiatives and corporate carbon performance of European listed firms. ...We use three‐way fixed‐effects model, and our sample comprises of 2444 firm‐year observations from 12 European countries, covering a 16‐year period (2004–2019). First, we find that corporate sustainability initiatives, a composite measure comprising of emission reduction initiatives, environmental innovations and efficient use of resources, has a positive relationship with corporate carbon performance, in terms of reduced greenhouse gas (GHG) emission intensity. Second, we find that the relationship between corporate sustainability initiatives and corporate carbon performance is stronger for firms in polluting industries. Overall, our evidence lends support for the efficiency‐oriented arguments of the neo‐institutional theory in that organisations respond to climate‐related risks by making substantive engagements in corporate sustainability initiatives, such as emission reduction initiatives, environmental innovations and efficient use of resources, which in turn facilitates organisations' effort to reduce GHG emission and improve corporate carbon performance.
This paper provides an up-to-date and comprehensive systematic literature review (SLR) of the existing research on women on corporate boards (WOCBs) and corporate financial and non-financial ...performance. The aim is to synthesise and extend current understanding of both the existing (i) theoretical (i.e., economic, psychological and social) perspectives and (ii) empirical evidence on the (a) multi-level (i.e., individual-, social-, firm- and country-level) antecedents of WOCBs, and (b) the effects that WOCBs have on a wide range of corporate financial and non-financial performance. We achieve this by adopting a three-step SLR approach to analyse/review one of the largest SLR datasets to be employed to date, consisting of 634 mixed, qualitative, quantitative and theoretical studies conducted in over 100 countries from more than 10 disciplines (e.g., accounting, finance, economics and governance) from 1981 to 2019 and published in 270 top-ranked journals. Our findings are as follows. First, a large number of existing studies are descriptive and/or they draw on single rather than multi-theoretical perspectives. Second, existing studies have focused on firm-level rather than country-level antecedents of WOCBs. Third, observable methodological limitations include the dearth of qualitative, mixed-methods and cross-cultural/country studies. Finally, we outline opportunities for future WOCBs research.
This paper seeks to contribute to the existing business strategy and the environment literature by examining the effect of governance structures on environmental performance within a unique context ...of improving environmental governance, policies, regulations, and management. Specifically, we investigate the extent to which corporate board gender diversity, including the proportion, age, and level of education of female directors, affects environmental performance of Chinese publicly listed corporations. Using one of the largest Chinese data sets to date, consisting of a sample of 383 listed A‐shares from 2011 to 2015 (i.e., observations of 1,674), our findings are threefold. First, we find that the proportion and age of female directors have a positive effect on the overall corporate environmental performance. Second, our findings indicate that the proportion and age of female directors also have a positive effect on the three individual environmental performance components, namely, environmental (a) strategy, (b) implementation, and (c) disclosure. Finally, and by contrast, we do not find any evidence that suggests that the level of education of female directors has any impact on environmental performance, neither the overall environmental performance measure nor its individual components. Our findings have important implication for regulators and policymakers. Our evidence is robust to controlling for alternative measures, other governance and firm‐level control variables, and possible endogeneities. We interpret our findings within a multitheoretical framework that draws insights from agency, legitimacy, neo‐institutional, resource dependence, stakeholder, and tokenism theoretical perspectives.
Manuscript Type
Empirical
Research Question/Issue
This paper investigates the relationship between corporate governance (CG) and corporate social responsibility (CSR) and, consequently, examines ...whether CG can positively moderate the association between corporate financial performance (CFP) and CSR.
Research Findings/Insights
Using a sample of large listed corporations from 2002 to 2009, we find that, on average, better‐governed corporations tend to pursue a more socially responsible agenda through increased CSR practices. We also find that a combination of CSR and CG practices has a stronger positive effect on CFP than CSR alone, implying that CG positively influences the CFP‐CSR relationship. Our results are robust to controlling for different types of endogeneities, as well as alternative CFP, CG and CSR proxies.
Theoretical/Academic Implications
The paper generally contributes to the literature on CG, CSR, and CFP. Specifically, we make two main new contributions to the extant literature by drawing on new insights from an overarching neo‐institutional framework. First, we show why and how better‐governed corporations are more likely to pursue a more socially responsible agenda. Second, we provide evidence on why and how CG might strengthen the link between CFP and CSR.
Practitioner/Policy Implications
Our findings have important implications for corporate regulators and policy‐makers. Since our evidence suggests that better‐governed corporations are more likely to be more socially responsible with a consequential positive effect on CFP, it provides corporate regulators, managers and policy‐makers with a new impetus to develop a more explicit agenda of jointly pursuing CG and CSR reforms, instead of merely considering CSR as a peripheral component of CG or as an independent corporate activity.
Organizational boards of directors are one of the most important subgroups within most modern organizations, performing critical advisory, monitoring and resource dependence roles. This paper ...investigates the crucial question of whether the stock market values ethnic and gender diversity within organizational boards. We find that board diversity is positively associated with market valuation. We distinctively demonstrate further that ethnic diversity is valued more highly by the stock market than gender diversity. By contrast, we do not find any evidence of a significant non-linear link between board diversity and market valuation. Our findings are robust across a number of econometric models that deal with different types of endogeneities and market valuation measures. Overall, our results are consistent with agency and resource dependence theoretical predictions.
This study investigates the effect of environmental performance that is driven by good environmental policies, regulations, and management on firm's financial distress and, consequently, ascertains ...the extent to which top management teams' (TMTs') characteristics can moderate the environmental performance–financial distress nexus in China using 749 firms over the 2009–2014 period (i.e., generating over 3,000 individual observations). Our findings are twofold. First, our results indicate that increased environmental performance that is driven by good environmental policies tends to strategically reduce the extent of firm financial distress. Second, this nexus is moderated by TMT gender diversity, foreign exposure, and political connection. We interpret our findings within neo‐institutional, upper echelons, and risk management theoretical perspectives. The findings are robust to the use of alternative measures of financial distress, estimation techniques, and endogeneity problems.
This study examines the impact of chief executive officer (CEO) attributes on sustainable performance, environmental performance, and environmental reporting, which are motivated by institutionally ...driven environmental policies, regulations, and management in the context of Chinese listed firms. With the use of a comprehensive dataset of 2,854 Chinese listed firms over the 2010–2017 period (i.e., making over 16,000 individual firm‐year observations), our findings are fourfold. First, our overall findings reveal that CEOs with research background tend to engage more in activities that improve sustainable performance, environmental performance, and environmental reporting than do those without research background. Second, CEOs with financial expertise are positively linked with increased sustainable performance and environmental reporting. Third, CEOs with foreign exposure are more eager to engage in activities that enhance sustainable and environmental performance than do those without foreign exposure. Fourth, young CEOs tend to take actions that reduce both sustainable and environmental performance than do their older counterparts. We interpret our results within upper echelons theoretical perspective. The results are robust to alternative measures, potential endogeneities, and sample selection problems.
This study investigates the extent to which South African listed corporations voluntarily disclose information on black economic empowerment (BEE) in their annual and sustainability reports using a ...sample of 75 listed corporations from 2003 to 2009. BEE is a form of socio-economic affirmative action championed by the African National Congress (ANC)-led government to address historical imbalances in business participation and ownership in South Africa. We find that block ownership and institutional ownership are negatively associated with the extent of BEE disclosures, whereas government ownership, board diversity (age, education, ethnicity, nationality and occupation), board size and non-executive directors are positively related to the extent of BEE disclosures. By contrast, dual board leadership structure and gender diversity are not significantly associated with BEE disclosures. Our results are robust when controlling for firm-level characteristics, fixedeffects and alternative disclosure proxies. Our results are largely consistent with the predictions of agency, legitimacy, resource dependence and stakeholder theories.
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