No full-text available
To read the full-text of this research,
you can request a copy directly from the authors.
Corporate Governance and Environmental Performance: A Systematic Overview
Abstract
In recent years, a growing number of empirical studies has started to thoroughly analyze the nexus between corporate governance and corporate environmental performance. This paper provides the first survey of the literature on this issue. In doing so, we describe the different ways of how internal (ownership, board of directors, and management) and external corporate governance (market for corporate control, institutional and regulatory environments) can impact corporate environmental performance and synthesize the most recent findings on the relation between the two constructs. We find that corporate governance have proved to be key in determining corporate environmental performance. Moreover, the effects of both internal and external corporate governance mechanisms are important drivers of corporate environmental performance. Taking these findings into account maybe crucial in understanding the nature and direction of the relationship between corporate governance and corporate environmental performance.
... These include specific backgrounds and experiences that can increase the firm's sensitivity to stakeholder interests. As a result, resource dependence theory suggests that large boards are better able to pursue green operations (Endo, 2020;Liu, 2018;Miroshnychenko et al., 2019;Post et al., 2011Post et al., , 2015. ...
... We also acknowledge the limitations of our work, noting that these may provide fruitful avenues for future research. While offering novel insights into the board characteristics that influence the discrepancy between environmental walk and talk efforts, other corporate governance mechanisms, such as compensation structure and practices (short-vs long-term incentives), the identity of the ultimate owners (widely-held vs concentrated ownership), and the degree of their involvement in the firms' management (professional vs. family management) may also be important in shaping the firm's environmental actions (Cho et al., 2019;Kim et al., 2017;Miroshnychenko et al., 2019). ...
Drawing on legitimacy theory, we study the nexus between green communication and the implementation of green practices, and in particular, we focus on the determinants of their discrepancy. Based on a large sample of firms in 58 countries over a 19‐year period, we employ an index to measure the discrepancy between green operations and the communicated practices, mapped to each firm's board structure. The results provide the first empirical evidence that larger, more gender‐diverse, and more independent boards are associated with a preponderance of green communication over implementation. We interpret this imbalance as a strategy to participate in the public discourse to gain moral legitimacy. Conversely, CEO duality is associated with a discrepancy in the opposite direction, with firms focusing more on implementing green practices than talking about them, suggesting that these firms aim mainly at gaining pragmatic legitimacy from their stakeholders.
... The literature also suggests that there might be a possible relationship between corporate governance and environmental performance, although the results are mixed. For example, after reviewing the literature, Miroshnychenko et al. (2019) conclude that internal corporate governance mechanisms are important determinants of environmental performance. For example, Lu and Herremans (2019) report a positive association between gender diversity and firm environmental performance (measured with scores from Sustainalytics). ...
... To account for the potential relationship between corporate governance mechanisms and greenhouse gas emissions, we control for board size (natural logarithm of number of board directors), gender diversity (% female board members), board independence and CEO duality. Zailani et al. (2012) and Miroshnychenko et al. (2019) suggest that external governance forces (institutional and regulatory environments) also influence a firm's environmental performance, that is in general consistent with of the literature on institutional theory and environmental management practices ( Delmas and Toffel, 2004 ;Daddi et al., 2016 ;Wang et al., 2018 ). Therefore, we also control for the level of institutional development. ...
... Second, we investigate whether greenwashing is affected by corporate governance elements and, specifically, by board characteristics. While the nexus between corporate governance and corporate environmental performance has received robust attention over the last years (Miroshnychenko et al., 2019;Walls et al., 2012), there is still an open theoretical and empirical question that has received scant attention so far: which corporate governance mechanisms can specifically foster, or hinder greenwashing? Our results point towards the existence of a relationship between certain corporate governance characteristics and greenwashing behaviors. ...
... Building on the existing literature on the nexus of corporate governance and environmental performance (Miroshnychenko et al., 2019;Walls et al., 2012), the relationship between board size and greenwashing can appear controversial. Some scholars argue that larger boards entail larger inefficiencies in the interaction of firm's insiders with outsiders (Raheja, 2005). ...
As climate change increasingly challenges business models, the disclosure of firm environmental performance casts growing attention by corporate stakeholders. This creates wider opportunities and incentives for greenwash behaviors. We propose a novel set of measures to capture greenwashing and we investigate the association between greenwashing and corporate governance features that traditionally mitigate agency problems. We show that board characteristics are variously associated with the apparent degree of corporate greenwashing. Firms with more independent directors tend to greenwash more, the presence of female board directors seems to have a positive impact on the degree of greenwashing, while the effect of board size on greenwashing remains ambiguous. Importantly, we find that greenwashing reduces firm value.
... Diferentes contextos institucionais podem revelar a maneira como as práticas de sustentabilidade corporativa são divulgadas pelos agentes da governança e como influenciam o desempenho alcançado pelas entidades públicas (Kim et al., 2013;Ortas et al., 2015). O desempenho sustentável por meio de práticas divulgadas pela governança não desconsidera os fatores do ambiente econômico, regulatório, de mercado e da sociedade em geral, independentemente destes, o contexto das práticas de sustentabilidade representa peça-chave para evidenciar como o desempenho sustentável pode ser alcançado pelas entidades públicas (Miroshnychenko et al., 2018). ...
... Teixeira et al. (2017) O contexto institucional não favorável pode revelar que os agentes da governança podem estar executando práticas para se legitimarem em seus cargos, em vez de agregarem valor sustentável às suas operações. Miroshnychenko et al. (2018) Características institucionais da governança como tamanho do conselho, relação com o mercado e estrutura de propriedade também estiveram relacionadas ao desempenho sustentável das companhias. Fonte: Elaborado pelo autor (2023). ...
Objetivo: Investigar a percepção acerca da sustentabilidade corporativa por meio de práticas divulgadas pela governança de estatais federais de controle direto da União. Método(s): Pesquisa de natureza exploratória, com abordagem qualitativa e análise de relatórios corporativos. A análise de conteúdo ocorreu por meio do levantamento do compliance entre os relatórios de gestão das estatais ao framework da Global Reporting Initiative, via atendimento das diretrizes econômicas, ambientais e sociais recomendadas pelo órgão normativo. Resultados: Sustentabilidade corporativa é percebida como execução de normas e práticas de redução de custos pela governança. A governança das empresas públicas e das sociedades de economia mista não apresentaram percepção adequada acerca da sustentabilidade corporativa como práticas voluntárias, pois apenas atenderam às exigências decorrentes de eventuais fiscalizações. Para a governança das estatais, apresentar que as diretrizes do pilar econômico, ambiental e social estavam sendo cumpridas foi uma forma de se apresentarem mais eficientes. As diretrizes ambientais foram as menos cumpridas, apesar de muitas das estatais desempenharem o uso racional da água, consumo eficiente da energia, gerenciamento de resíduos e a coleta seletiva solidária. Contribuições: As governanças das estatais também não se apresentaram socialmente responsáveis, apesar de seus índices sociais apresentarem melhores desempenhos do que os ambientais. As estatais resumiram o pilar social ao oferecimento de treinamentos para seus funcionários, e divulgaram o atendimento de diretrizes recomendadas nos pilares econômico, ambiental e social como respostas a isomorfismo e como ferramenta de legitimidade.
... Solomon (2020) described corporate governance as a system to ensure that the company demonstrates accountability to stakeholders and acts in responsible ways, including how they threaten the environment. Internal management creates a mechanism that influences the company's decision-making responsibility to the environment (Miroshnychenko et al., 2019). The company's governance has a possible chance to reduce the conflict of interests between shareholders and management (agency problem) and align various shareholders' interests, including government and environmentalist, to achieve excellence compete (Nginyo et al., 2018). ...
... The cost which distributed on the environmental issue is not influenced by the BoD decision. This finding does not support Miroshnychenko et al. (2019), who found that corporate governance mechanisms such as BoD and top management play a significant role in EP. ...
This study aims to acknowledge how environmental performance, corporate governance, competitive advantage, and financial performance-linked each other in Japan. The data used are data from chemical, pharmaceutical, and machinery sub-sector companies listed on the Japan Exchange Group 2013 - 2018. This research was explanatory research using a quantitative approach and implemented Partial least Square (PLS). This study found that the board of directors and firm performance have no significant effect on the company's environmental performance, while corporate control and ownership structure provide a different result. Then, environmental performance and ownership structure have been proven to bring a significant contribution to the company's competitive advantage. Reflecting on Japan, this study suggests several recommendations to the Indonesian Ministry of Environment and Forestry to develop environmental conservation schemes and concepts implemented by public companies in Indonesia and the Indonesian Ministry of Finance to develop applicable environmental accounting concepts for public companies in Indonesia.
... As suggest, the relationship between corporate governance and GW manifests its pieces of evidence through some company-related factors, such as the use of disclosure-based strategies, the presence of effective control mechanisms, through social-related factors, such as the stakeholders' pressures or perceptions of the possible misleading intents or through institution and country-related factors, such as the regulation regarding ESG disclosure (Velte, 2022). Consistently with the previous assertions, Ghitti et al. (2023) state that although the relationship between corporate governance and environmental performance has been investigated deeply over time (Miroshnychenko et al., 2019), more scant attention has been demonstrated towards the role of internal corporate governance mechanisms may foster or constrain GW. ...
Greenwashing (GW) is a multidimensional phenomenon based on the discrepancy between corporate communications and performance on environmental issues. It results from the trade-off between the increasing importance of environmental compliance and companies’ substantial efforts towards this objective. Among the several definitions of this phenomenon, the ones that enlighten its misleading intent shed light on the possible linkage between GW and the willingness to hide potential scandals or illegal behaviours.
Grounding on the institutionalized agency theory and on the definition of a multifaceted vision of GW, this chapter illustrates a set of main internal, external, and hybrid GW dimensions such as the levels of GW, the role assumed by the industry, and the institutional context, the impact on stakeholders’ perceptions and companies’ value, the locus and the sources of GW and on its level of objectivity. Then, it shows how some prevention strategies based on corporate governance can contrast GW and environmental crimes. Specifically, internal prevention strategies are based on voluntary disclosure and stakeholder involvement, whereas external prevention strategies are based on mandatory standards and disclosure assurance.
Therefore, this chapter provides a conceptual framework useful for understanding GW strategies as a possible way of hiding environmental crimes and legitimating the companies’ behaviours as well as GW prevention strategies based on corporate governance.
... IAQ is basically a component of corporate governance that influences the GW and FP of firms (Ghitti et al., 2023). Various aspects of corporate governance namely board size, board independence, and IAQ are positively associated with firms' environmental performance, GW behavior, and FP (Chakraborty & Yılmaz, 2017;Miroshnychenko et al., 2019;Yu et al., 2020). Generally, ESG disclosures of firms are unaudited leading us to predict that an effect IAQ will ensure that ESG disclosures comply with regulatory requirements and fulfill stakeholders' needs which eventually will increase the FP of firms (Lu & Wang, 2021). ...
Greenwashing (GW) is a common business strategy employed by modern-day firms to realize sustainability and financial goals. However, the puzzle of whether GW and underlying conditions essential to improve the financial performance (FP) remains unresolved. This study aims to empirically investigate the impact of GW on FP by operationalizing internal audit quality and digital technologies as moderators. The data of non-financial Indonesian firms between 2018 to 2022 were drawn and analyzed using generalized method of moments (GMM) technique. The findings indicate that GW has a significant positive effect on FP. The results also confirmed a significant positive moderating effect of internal audit quality on the relationship between GW/FP whereas digital technologies exhibit an insignificant positive effect on the nexus between GW/FP. Our findings contribute to validating the implementation of GW blended with internal audit quality and digital technologies to improve the sustainability and financial portfolios of the firms located in emerging economies.
... For example, seminal work elucidates how informal environmental regulation (IER), mainly via environmental media coverage, exerts considerable pressure on firms to comply with existing environmental standards and innovate and elevate their environmental performance. The synthesis offered by Miroshnychenko et al. (2019) further delineates the significant impact of external corporate governance mechanisms, including informal regulatory pressures, on driving corporate environmental performance improvements. Their research provides compelling evidence that the external governance environment is a critical determinant of environmental performance, highlighting the multifaceted nature of corporate environmental governance. ...
In the context of China’s rapid economic development, corporate pollutant emissions are increasing, underscoring the imperative for further enhancement of corporate environmental performance. Given the significance of high-tech enterprises in the environmental domain, this study examines the impact of investor attention on the corporate environmental performance of Chinese high-tech enterprises. This study utilized data from 463 high-tech enterprises in mainland China from 2011 to 2022 and employed the dynamic panel generalized method of moments (GMM) technique. The findings indicate that investor attention has a negative impact on the corporate environmental performance of high-tech enterprises. This research also finds that both media attention and coverage sentiment mitigate the negative relationship between investor attention and environmental performance of high-tech firms. Heterogeneity analysis reveals that in the sample of IT service industry, heightened media attention exacerbates the negative impact of investor attention on corporate environmental performance, and media coverage sentiment exhibits no significant moderating effect. Within samples of non-polluting and state-owned enterprises, increased media coverage sentiment amplifies the negative impact of investor attention on corporate environmental performance. This paper suggests that policymakers should foster a media environment that supports accurate and thorough environmental reporting while businesses should proactively engage with media to align investor perceptions with sustainable environmental practices.
... Change initiatives are connected to a company's future market value and profitability (Miroshnychenko et al. 2019). In a developing market, the USA shows a high and favorable relationship between ESG (as measured by ESG reporting score) and value-added (Alareeni and Hamdan 2020). ...
In light of the conflicting findings within the existing empirical literature regarding the factors influencing environmental, social, and governance (ESG) disclosures in the context of sustainable investment and firms’ green innovation performance (GIP), our current study stands out as a distinctive research endeavor that examines how the relationship is influenced by the moderating effects of sales growth. Non-financial trade manufacturing companies listed on the Shanghai and Shenzhen stock exchanges between 2015 and 2020 were selected for this study. For data estimation, panel regression estimations using OLS and fixed effects models have been used. The results demonstrate a significant moderation of manufacturing industry’s sales growth in China on the relationship between ESG disclosures and sustainable finance (operationalized by green credit, and green investment), and green innovation (operationalized by R&D intensity and green patents). Several practical takeaways are offered to boost green innovation performance among ESG reporting enterprises and increase the effectiveness of R&D intensity. These findings, including policy recommendations, will benefit all stakeholders.
... Other authors have classified the mechanisms of corporate governance in two groups [39,40]: internal mechanisms (set up by the company itself) and external mechanisms (linked to the different markets in which the company maybe present). The internal mechanisms include, on the one hand, ownership structure (degree of concentration and large shareholder identity) and, on the other, the board of directors and its functioning in association with certain characteristics: board independence [41][42][43][44][45][46], board size [45,47,48], percentage of women on board [42,49], and CEO (chief executive officer) duality [43,48,50], among others; And the external mechanisms include market for corporate control and institutional and regulatory environments. ...
Currently, a lack of consensus exists in the literature on the link between performance and corporate social responsibility disclosure (CSRD). A meta-analysis was carried out to shed light on this controversial topic, using the ABI/Inform Complete and EconLit databases as search tools. To isolate articles with substantive, methodological relevance, various filters were used. In addition to other criteria, all articles had to contain certain keywords related to the study’s variables and at least one of the seven keywords indicating empirical data analysis. As a result of this procedure, the meta-analysis included only 95 articles. To process the sample, we employed the procedure developed by Hunter and Schmidt. The results show that the CSRD-performance relationship is not significant enough for practical purposes. However, an analysis of moderating variables revealed that the connection becomes of practical importance when moderated by three key variables: region, type of disclosure, and measures of organization size. This research’s findings make a significant contribution by clarifying the links between CSRD and performance and identifying which variables can explain the diverse results of previous research. Regarding limitations, the meta-analysis was subject to the availability of published research and included only studies that reported Pearson correlation coefficients and standardized beta coefficients.
This paper aims to reveal whether high-speed rail (HSR) can affect corporate social responsibility (CSR). First, based on difference-in-differences (DID) model, it is found that HSR promotes CSR, and the characteristics such as urban HSR kilometers (HSRM), number of cities directly connected by HSR (HSRL) and number of HSR stations (HSRS) also show a positive correlation with CSR. Second, by setting cross-effect model, it is found that HSR promotes monetary capital responsibility (MCR) by increasing government supervision pressure, promotes human capital responsibility (HCR) by promoting industrial agglomeration, and it promotes social capital responsibility (SCR) by strengthening financing screening function. From the perspective of economic geography, this paper analyzes intra-regional HSR station location effect and inter-regional CSR spillover effect. Third, through sub-sample regression, this paper analyzes the impact of intra-regional HSR stations on CSR. As HSR station-firm distance is within 10km, HSR inhibits CSR; HSR promotes CSR as the distance is within 10–150km; HSR inhibits CSR as the distance exceeds 150km. Fourth, analyze the impact of inter-regional HSR on CSR spillover, HSR has a positive impact on CSR spillover, while HSR accelerates negative spillover of MCR and HCR. This study provides a theoretical basis for increasing CSR from the perspective of HSR construction.
The importance of corporate boards in advancing business growth and sustainability cannot be ignored. To lay the foundations for sustainable business growth, it is extremely beneficial to develop a thorough understanding of the role of corporate boards in the environmental actions of firms. This book focuses on the nexus between board policies and environmental practices worldwide paying specific attention to greenwashing phenomenon and presenting a global perspective of the topic. In discussing the key theoretical perspectives, findings, and areas of consensus and disagreement on the role of corporate boards in influencing the environmental practices of firms around the world, it advances the state-of-the art and a much-needed integration of the relevant literature. The contents of this book can serve as a springboard for future research aiming to better understand the environmental actions of firms with different board policies. The book also provides valuable insights for improving not only corporate governance practices but also public policies related to environmental initiatives.
The growing attention to corporate green practices and the increased competition in global markets have pressed companies to disclose information about their environmental footprints. In doing so, some firms tend to either overstate or understate their environmental commitments by adopting so-called “greenwashing” or “brownwashing” strategies, respectively. In this paper, we analyze the impact of different types of environmental communication strategies on firm value and operating performance using a panel of 3490 publicly traded companies from 58 countries and 19 industries. Results show that it does not pay to be a greenwasher, whereas the decision to not properly communicate a firm’s environmental commitment is associated with lower financial performance. Therefore, this study highlights the importance of having not only effective green practices, but also coherent communication of environmental strategies. This is the first attempt to empirically model the impact of greenwashing and brownwashing strategies on corporate financial performance in a longitudinal setting.
In this paper, we investigate the relationship between gender and environmental sustainability. Based on a sample of 296 firms, drawn from the population of US publicly traded firms over a five-year period, we empirically test whether firms that have (1) more gender diverse boards of directors and (2) more policies and practices that enable or reinforce gender diversity throughout the organization, adopted more environmentally responsible policies and practices. We find that both ‘demographic’ and ‘structural’ gender diversity are significant predictors of a firm's environmental sustainability initiatives. Our findings show gender diversity is a sustainability issue as well. Copyright © 2016 John Wiley & Sons, Ltd and ERP Environment
We propose a model of planned corporate environmental behaviour that emphasises the values and attitudes of managers towards the environment, environmental intentions and the context in which these intentions are formed and translated into actual performance. In particular, we focus on the extent to which environmentally reactive (as oppose to pro-active) managers influence the environmental performance of their firms. We identify the factors that mitigate or accentuate the effects of environmental “reactivism”—i.e. a mind-set shared by those who assign to the state the responsibility of protecting the environment. We generate a series of hypotheses and use structural equation modelling to test them in the context of a unique dataset of Argentinean firms. Our system’s approach to corporate environmental behaviour explains approximatively 70 % of the variation in reported environmental performance across firms while highlighting elements of the model that may potentially be influenced by policy. Amongst other things, our empirical results suggest that stakeholder pressures can be an effective tool in the development of pro-environmental attitudes (and environmental intentions in the case of small firms) and in so doing offset some of the negative effects of environmental reactivism on environmental performance. Our paper highlights a number of other important implications for the design and implementation of environmental policies that account for human managerial determinants of corporate behaviour and social factors.
The extant literature has examined the effects of ownership structures on corporate social responsibility (CSR), yet it has overlooked the non-linear and interactive effects among major shareholder groups. In this study, we examine the non-linear effects of insider and institutional ownerships on CSR. We also examine whether it is necessary to have both incentive alignment and monitoring mechanisms (complementary view) or it is sufficient to have either mechanism (substitutive view) to promote CSR. Using a sample of the U.S. Fortune 1000 firms, our results suggest that insider and institutional ownerships have non-linear effects on CSR. We also find support for the complementary mechanisms view, in that the highest CSR rating is observed when both ownership levels are high. Therefore, firms need to maintain strong governance structures to realize synergistic effects in promoting CSR. Our findings provide a more in-depth understanding of the relationships between ownership structures and corporate social outcomes.
We theoretically discuss and empirically show how CEO power based on environmental expertise and formal influence over executives and directors, in the absence and presence of shareholder activism, spurs firms toward greener strategies. Our results support the idea that CEOs with informal power, grounded in expertise, reduce corporate environmental impact and this relationship is amplified when the CEO also enjoys formal power over the board of directors. Additionally, we found that any source of CEO power, whether informal or formal, is a good catalyst for transforming shareholder activism into corporate greening. However, in the absence of such activism, only CEOs’ informal environmental expert power acts as a determinant of firm environmental performance.
Purpose – The purpose of this paper is to empirically investigate how top executives’ compensation is
associated with environmental performance in the Chinese context and how this association varies
with differing levels of industrial competition.
Design/methodology/approach – Combining agency and institutional theories, the empirical study
is based on a sample of 698 publicly listed firms in China’s manufacturing sector.
Findings – The authors find that top executives’ cash pay has a positive association, and equity
ownership a negative association, with corporate environmental performance. Furthermore, in more
competitive industries, both pay and ownership are more strongly associated with environmental
performance, indicating that industrial competition plays a moderating role in these relationships.
Practical implications – The findings imply that different incentive schemes can motivate
executives toward environmental management in the Chinese context in opposite directions. They
highlight the importance of improving regulation in order to motivate firms to engage in further
environmental management.
Originality/value – Previous work on the relationship between executives’ compensation and socially
responsible activities has mainly focussed on developed countries. This study is set in an emerging economy,
and identifies new evidence to show that the effect of executive incentives is institutionally specific. In
addition, it explores the effect of industrial competition on executives’ incentives to engage in environmental
management, suggesting an explanation for the contradictory evidence found in previous research.
This study explores the relationship between board environmental committees and corporate environmental performance (CEP). We propose that board environmental committees will be positively associated with CEP. Moreover, we argue that the composition of the committee (i.e., stakeholder representation) as well as the presence of a sustainability manager will influence this relationship. Our results find support for a positive association between board environmental committees and CEP. Further, the presence of a senior-level environmental manager positively moderates this relationship, but is not effective in isolation. Unexpectedly, no support was found for the influences of stakeholder representation.
This study relies on environmental stewardship, a stakeholder-enlarged view of stewardship theory, and institutional theory to analyze the relationship between CEO compensation and firms’ environmental commitment in a worldwide sample of 520 large listed firms. Our findings show that environment friendly firms pay their CEOs less total compensation and rely less on incentive-based compensation than environment careless firms. This negative relationship is stronger in institutional contexts where national environmental regulations are weaker. Our findings have important theoretical meaning and practical implications. Results show that CEOs do not necessarily act opportunistically; rather some of them may be willing to act as stewards of the natural environment and accept a lower, less incentive-based compensation from environment friendly firms. This study also provides evidence of the important influence of the institutional context in setting-up CEO compensation as the relationship is stronger when national environmental regulations are weaker. Our findings question the universal validity of agency theory in explaining CEO compensation. Compensation based on pecuniary incentives might be less indicated to motivate CEOs who feel rewarded by playing a stewardship role for environment friendly firms. When designing compensation for CEOs, compensation committees and external compensation advisors should consider psychological and institutional factors that might affect CEO motivation.
In this study, we examine the determinants of corporate environmental responsibility (CER), as well as the relationship between legal systems and CER as measured by a unique set of global environmental cost data. Results of our analyses show that firms’ legal origins affect CER, which requires a long-term management perspective. Specifically, our results indicate that civil law firms exhibit significantly higher levels of CER than common law firms. In addition, results of an auxiliary test suggest that manager shareholding has a significant, nonlinear relationship with CER. The association between a firm’s legal origin and its CER performance remains robust after controlling for the effects of managerial ownership and issues related to endogeneity. Our findings imply that although the majority of corporate law studies in the past few decades provide support for the common law system emphasizing the maximization of shareholder value and investor protection, the civil law system stressing the maximization of stakeholder wealth and the importance of CER may become more influential in the coming decades as CER becomes central to firms’ operations.
Previous studies in Western contexts have examined the relationships between various board characteristics and CSR, yet the relationships need to be re-examined in non-Western contexts given differential theoretical premises across contexts. We specifically propose that the effects of board characteristics on CSR in Korea should be patterned distinctively from Western-based existing literature, focusing on three important board characteristics, such as a board’s independence, social ties, and diversity. Using a panel dataset from large Korean firms, we found that various relationships between board characteristics and CSR were non-linear, whereas most of the previous research on Western contexts found that the same relationships were linear. Specifically, curvilinear relationships were found between CSR and board independence (i.e., exponentially growing shape), CEO-outside director social ties (i.e., inverted U-shape), and educational diversity (i.e., U-shape). Our findings suggest that there is no universal feature of CSR-supportive board characteristics due to the unique characteristics of various institutional contexts.
The conventional wisdom concerning environmental protection is that it comes at an additional cost imposed on firms, which may erode their global competitiveness. However, during the last decade, this paradigm has been challenged by a number of analysts (e.g., Porter & van der Linde, 1995), who have argued basically that improving a company's environmental performance can lead to better economic or financial performance, and not necessarily to an increase in cost. The aim of this paper is to review empirical evidence of improvement in both environmental and economic or financial performance. We systematically analyze the mechanism involved in each of the following channels of potential revenue increase or cost reduction owing to better environmental practices: (a) better access to certain markets; (b) differentiating products; (c) selling pollution-control technology; (d) risk management and relations with external stakeholders; (e) cost of material, energy, and services; (f) cost of capital; and (g) cost of labor. In each case, we try to identify the circumstances most likely to lead to a "win-win" situation, i.e., better environmental and financial performance. We also provide a diagnostic of the type of firms most likely to reap such benefits.
This study examines the impact of board diversity on firms’ corporate social responsibility (CSR) performance. Using seven different measures of board diversity across 1,489 U.S. firms from 1999 to 2011, the study finds that board diversity is positively associated with CSR performance. Board diversity is associated with a greater number of areas in which CSR is strong and a fewer number of areas in which CSR is a concern. These findings support the stakeholder theory and are consistent with the view that board diversity enhances firms’ ability to satisfy the needs of their broader groups of stakeholders. We find that gender, tenure, and expertise diversities seem to be the driving factors of firms’ CSR activities. Furthermore, we find that board diversity significantly increases CSR performance by increasing CSR strengths and reducing CSR concerns for firms producing consumer-oriented products and firms operating in more competitive industries. Our results remain robust using different measures of CSR performance, different estimation methods, and different samples.
A growing body of work suggests that the presence of women and of independent directors on boards of directors is associated with higher corporate environmental performance. However, the mechanisms linking board composition to corporate environmental performance are not well understood. This study proposes and empirically tests the mediating role of sustainability-themed alliances in the relationship between board composition and corporate environmental performance. Using the population of public oil and gas firms in the United States (U.S.) as the sample, the study relies on renewable energy alliances to measure sustainability-themed alliances and longitudinally analyzes lagged data for independent and control variables. The study found that 1) the higher the representation of women on a firm’s board, the more likely the firm is to form sustainability-themed alliances, and 2) the higher the representation of independent directors on a firm’s board, the more likely the firm is to form sustainability-themed alliances. Such alliances, in turn, positively contribute to corporate environmental performance. This paper discusses the study’s contributions to the board composition-social performance literature.
There has been growing interest in green management practices among practitioners, researchers and regulators in recent years. However, there is limited research that examines the connection between natural environments and human resource management practices. The current study examined the relationship between Chief Executive Officer (CEO) compensation and green management practices within the agency theory and institutional theory frameworks. Results revealed a significant negative relationship between green management practices and CEO base pay, however, there was not a significant relationship between green management practices and CEO bonuses. In line with previous agency theory research, findings suggest a negative relationship between state regulation and CEO compensation in green states. An important implication for practice is that the negative relationship may strengthen negative perceptions about green management practices among CEOs and reduce willingness to implement green management practices.
This paper examines the impact of corporate board’s characteristics on the voluntary disclosure of greenhouse gas (GHG) emissions in the form of a Carbon Disclosure Project report. Using both univariate and regression models with a sample of the 329 largest companies in the United Kingdom, we find a significant positive association between gender diversity (measured as the percentage of female directors on the board) and the propensity to disclose GHG information as well as the extensiveness of that disclosure. In addition, a board with more independent directors or environmental committee show a higher tendency to be ecologic transparent. However, if the committee is not sufficiently large, independent or active, its effect seems insignificant. The results are consistent with stakeholder theory, suggesting that a diversified and independent board and the existence of a board-level environmental committee may balance a firm’s financial and non-financial goals with limited resources and moderate the possible conflicting expectations of stakeholders who have disparate interests. The findings should be useful for top managers and regulators who are interested in improving corporate governance practices and climate-change strategies.
This study explores the mediating role of corporate social responsibility (CSR) management quality in the relationship between board diversity and CSR performance. It states that generational diversity is a consistent construct of age diversity as variety, and uses three different proxies to measure CSR management quality and performance. The sample consists of 146 companies listed in FTSE 100, DAX 30, and CAC 40 for the year 2009. The results reveal that generational diversity enables a more effective design of vision and strategies to address financial and extra-financial aspects, and consequently, it encourages companies to adopt a sustainable approach to their businesses. This study concludes that generational diversity is a key component for improving good corporate governance codes. The findings of this research recommend enhancing generational diversity in board structures to encourage sustainability in firms that aspire to be in tune with the needs of the times. Copyright © 2013 John Wiley & Sons, Ltd and ERP Environment
In this paper, we seek to answer two questions: (1) what does boardroom diversity stand for in the strategic management literature? And, (2) is there a significant relationship between boardroom diversity and corporate social performance. We first clarify the boardroom diversity concept, distinguishing between a structural diversity of boards and a demographic diversity in boards, and then we investigate its possible linkage to social performance in a sample of S&P500 firms. We find a significant relationship between diversity in boards and social performance. This relationship is moderated by diversity of boards. Our results also reveal the effects of the specific variables that make up the diversity of boards and diversity in boards constructs. In particular, gender, and age have a significant effect on corporate social performance. Some important measurement issues are raised and discussed.
According to previous research, family and non-family businesses differ with respect to corporate social responsibility (CSR) policies in Japan. In this article, we address these differences and explore the main determinants of CSR in Japan, using a sample of 200 Japanese firms drawn randomly from a CSR database. In contrast with this previous research, we find that the characteristics of either family or non-family businesses do not influence CSR policies in general; however, when they do (for example, in human resources management), the influence is less strong for family businesses. We also find that firm size and innovation inclination are explanatory factors for CSR, supporting prior research in contexts other than Japan.
This study contributes to the work on board composition and firm corporate social responsibility by extending it to the environmental domain. It evaluates the relationship between boards of directors’ composition and environmental corporate social responsibility (ECSR) by integrating literatures on board composition, firm corporate social responsibility, and individual differences in attitudes toward and information about environmental issues. Using disclosed company data and the natural environment ratings data from Kinder Lydenberg Domini (KLD) Inc. for 78 Fortune 1000 companies, the study finds that a higher proportion of outside board directors is associated with more favorable ECSR and higher KLD strengths scores. Firms with boards composed of three or more female directors received higher KLD strengths scores. And, boards whose directors average closer to 56 years in age and those with a higher proportion of Western European directors are more likely to implement environmental governance structures or processes. Our results also reinforce growing concerns around unidimensional KLD measures.
Examining the relationship between governance and corporate innovation strategies, we found, in opposition to the assumption that owners have a unified voice, differences among governance constituencies' preferences for corporate innovation strategies. The managers of public pension funds preferred internal innovation, but professional investment funds' managers preferred acquiring external innovation. The profiles of boards of directors also shaped these innovation strategies. Inside directors with equity emphasized internal innovation, and outside directors with equity emphasized external innovation. The two types of fund manager equally preferred boards composed of outsider representatives with equity. However, pension fund managers preferred inside directors with equity more strongly than did professional investment fund owners.
Relatively little research has examined the effects of ownership on the firms’ corporate social responsibility (CSR). In addition,
most of it has been conducted in the Western context such as the U.S. and Europe. Using a sample of 118 large Korean firms,
we hypothesize that different types of shareholders will have distinct motivations toward the firm’s CSR engagement. We break
down ownership into different groups of shareholders: institutional, managerial, and foreign ownerships. Results indicate
a significant, positive relationship between CSR ratings and ownership by institutions and foreign investors. In contrast,
shareholding by top managers is negatively associated with firm’s CSR rating while outside director ownership is not significant.
We conclude that different owners have differential impacts on the firm’s CSR engagement.
We explore the relation between family ownership and corporate investment policy. Our analysis centers on two incentives, risk aversion and extended investment horizons, which potentially influence the level and type of investments that family firms undertake. We find that family firms devote less capital to long-term investments than firms with diffuse ownership structures. When dividing long-term investment into its two components of R&D and capital expenditures, we note that family firms, relative to nonfamily firms, prefer investing in physical assets relative to riskier R&D projects. Additional tests indicate that family firms receive fewer patent citations per dollar of R&D investment relative to nonfamily firms. Overall, all empirical results indicate that family preferences for lower firm risk, across all family sub-types, affects corporate R&D spending and capital expenditures. ยฉ 2012 Elsevier B.V.
Purpose
Sound corporate governance is now a mainstream issue of concern in the business world. However, there has been no systematic investigation of corporate governance practices in the healthcare sector. Allowing for a distinction between two types of healthcare organizations (profit and non‐profit), this paper aims to investigate nuances in the application of sound governance principles across different types of healthcare organizations in the context of a developing country, together with differing understanding and applications of corporate social responsibility.
Design/methodology/approach
The paper is based on a qualitative interpretive methodology, comprising in‐depth interviews with top hospital executives drawn from 21 Lebanese hospitals representing both the profit and non‐profit varieties.
Findings
The findings suggest some basic governance differences between for‐profit and non‐profit hospitals in terms of managerial structure, ownership and the role of the board of directors, as well as differing orientations towards corporate social responsibility. There is a general lack of understanding and application of corporate governance best practices in family‐owned, for‐profit hospitals, whereas non‐profit hospitals are more in line with corporate governance best practices, and more attuned to corporate social responsibility.
Originality/value
This paper presents fresh insights into applications of corporate governance and corporate social responsibility principles in a very important sector that has not received systematic attention and consideration in the literature.
This paper explores corporate social responsibility in family businesses. In particular, the research investigates family businesses in relation to a wide variety of constituent or stakeholder groups. It reports the preliminary results of focused interviews with 42 small and medium-sized Dutch family businesses. The data obtained from content analysis suggest that a mix of corporate social responsibility perspectives, help to explain the nature of relationships with, and behaviors toward, various constituency groups. The family character of the business most frequently impacts employee, client, and supplier relationships. Statistically significant interaction effects are reported for the following moderator variables: generation of the owner; company tenure in the community; community size; company size; and inclusion of the family surname in the business name. Interaction effects were also tested for industry type and gender. The paper also outlines some practical implications of the findings and suggests directions for future research.
Little is known about the impact of family ownership and management on corporate social performance. Some scholars have suggested that family firms are not likely to act in a socially responsible manner, while others have indicated that socially responsible behavior on the part of the family firm protects the family's assets. This preliminary study compares the degree to which family and nonfamily firms are socially responsible using data from 1991 to 2000 from the S&P 500. Two hundred sixty-one firms (202 nonfamily and 59 family) appeared in the S&P 500 for the 10-year period. Findings show that family firms are more socially responsible than nonfamily firms along several dimensions. This is likely due to family concern about image and reputation and a desire to protect family assets.
This paper examines legal rules covering protection of corporate shareholders and creditors, the origin of these rules, and the quality of their enforcement in 49 countries. The results show that common law countries generally have the best, and French civil law countries the worst, legal protections of investors, with German and Scandinavian civil law countries located in the middle. We also find that concentration of ownership of shares in the largest public companies is negatively related to investor protections, consistent with the hypothesis that small, diversified shareholders are unlikely to be important in countries that fail to protect their rights.
We present a new measure of legal protection of minority shareholders against expropriation by corporate insiders: the anti-self-dealing index. Assembled with the help of Lex Mundi law firms, the index is calculated for 72 countries based on legal rules prevailing in 2003, and focuses on private enforcement mechanisms, such as disclosure, approval, and litigation, governing a specific self-dealing transaction. This theoretically-grounded index predicts a variety of stock market outcomes, and generally works better than the commonly used index of anti-director rights.
Companies around the world adopt green practices with the aim to reduce their environmental impacts and improve their financial performance. The present study theorizes about and empirically examines the impacts of corporate green practices on financial performance. Indexes of pollution prevention, green supply management, green product development and ISO 14001 adoption are obtained for each firm in a panel of 3,490 publicly-traded companies from 58 countries over 13 years. Results show that internal green practices (pollution prevention and green supply chain management) are the major environmental drivers of financial performance, while external green practices (green product development) play a secondary role in determining financial performance. The adoption of ISO 14001 appears to have a negative impact on financial performance. This study provides empirical support for policy-makers promoting environmental practices that may lead to sustainable economic growth.
Environmental governance has emerged as a recent perspective to explain the link between corporate governance mechanisms and environmental performance such as pollution reduction. We extend current models by incorporating the crucial role of the underlying institutional logics in terms of an a priori focus on either shareholder rights or stakeholder inclusion, which, in turn, can be traced back to the legal origin of a specific country. Using data on a sample of common and civil law countries, we find support for our predictions that a shareholder-focused common law legal origin is associated with significantly higher emissions of CO2, and also that international environmental agreements like the Kyoto protocol seem to have a more pronounced effect in shareholder-centric economies than thus far assumed.
Companies increasingly extend their existing incentive systems by integrating several sustainable performance indicators. Although these ‘sustainability-oriented’ incentive systems clearly highlight which business objectives should be attained, little is known about the effects that these incentive systems have on employee behavior. Based on signaling theory, social identity theory and a person–organization fit (PO-fit) perspective, we assume positive relations between sustainability-oriented incentive systems and employee attraction, motivation and cooperation. Furthermore, we examine whether these relations are moderated by personal attitudes toward corporate sustainability activities as well as the underlying mechanisms at the moderation (mediated moderation). Our experimental results (with students as future employees) do not give support for a general positive relation between sustainability-oriented incentive systems and employee behavior. However, our data show that a person's attitude toward corporate sustainability activities moderates the link between sustainability-oriented incentive systems and employee behavior. Additionally, we find PO-fit perceptions to mediate the interaction effects. Copyright © 2015 John Wiley & Sons, Ltd and ERP Environment
This study investigates the relation between family control and corporate capital structure considering the dynamic nature of the debt policy and the ownership structure of family firms. Our results show that the sensitivity of debt to fluctuations in cash flow is less pronounced in family firms and highlight that family control increases the speed of adjustment toward target debt. Four dimensions of the family business model explain these results: deviations of voting from cash flow rights, the presence of a second blockholder in the company, involvement of family members in management and the generation in charge of the business. The weaker negative impact of cash flow on debt is driven by family firms with no control-enhancing mechanisms, companies with active family participation in management and family businesses that are still controlled by the first generation. By contrast, the more severe agency conflicts between owners and creditors in family firms with a second blockholder lead to more pronounced pecking order behaviour. Furthermore, the higher flexibility in corporate decision-making of family firms managed by the family and under the influence of the first generation explains that family companies are able to rebalance their capital structure faster.This article is protected by copyright. All rights reserved
Empirical evidence of the influence of shareholders and governance practices on corporate social responsibility (CSR) policies is mixed, and most studies have been conducted in the United States. This study of the French market and its unique characteristics reveals the forms of shareholding and CSR implementations, thereby shedding new light on the influence of shareholders on corporate social performance (CSP). Specifically, with a sample of French listed companies, the authors investigate how ownership concentration, ownership type, and governance practices relate to CSP. The geography of capital is relevant, but little evidence arises of the importance of shareholders’ identity. That is, neither family nor institutional shareholders influence CSP, and large shareholders seem to place less emphasis on CSR, suggesting that they are reluctant to invest in it. Finally, the results related to good governance practices are mixed, but board independence provides a foundation for good CSR.
In this study, we investigate the impact women leaders have on the corporate environmental strategies of organizations. Using a dataset of all Fortune 500 CEOs and boards of directors for a ten-year period, we examine several aspects of gender in leadership on environmental strategy. Specifically, we test the impact of women CEOs, the proportion of women on the BOD, the number of interlinks women board members hold, and the interactive and cumulative effects of women CEOs and gender diverse boards. Findings suggest that firms characterized by gender diverse leadership teams are more effective than other firms at pursuing environmentally friendly strategies. This study contributes to research on corporate governance and environmental performance by showing how the gender composition of leaders affects corporate practice. Copyright © 2015 John Wiley & Sons, Ltd and ERP Environment
This research investigates whether and how board independence influences corporate investment decisions in a Seemingly Unrelated Regression (SUR) framework, where the capital investment and the research and development (R&D) investment are examined simultaneously. We argue that the free cash flow problem primarily inflicts capital investments, while the managerial conservatism mainly undercuts the more risky R&D investments. Consistent with independent board mitigating both agency problems, we find that firms with a higher degree of board independence is negatively associated with capital investments but positively associated with R&D investments, after controlling for common determinants of investments. We address the endogeneity of board independence by exploiting an exogenous change in board structure brought about by the Sarbanes-Oxley Act (SOX) and continue to find consistent results.
This study addresses the heterogeneity of family firms in their engagement with corporate social responsibility (CSR). We build on stewardship theory and socioemotional wealth to explore the foundations of CSR in family firms and to examine whether the extent of engagement is based on values, and how and why this happens. We use the interpretative method of grounded theory to address these questions. Based on 12 case studies of Spanish family firms, this article illustrates the patterns of influence of family involvement and values in explaining the extent and scope of CSR.
The present paper advances knowledge of the drivers of firms' proactive environmental strategies. In particular, it explores the relationship between different corporate ownership structures and firms' green proactivity, in order to see whether some types of shareholder act as a stimulating driver for firms' proactive environmental behaviors. The study examines the explanatory power of corporate governance issues, such as a firm's ownership structure, as potential determinants of companies' environmental proactivity. Attention is focused on the European firms included into the Carbon Disclosure Project questionnaire 2012.
The results show that ownership structure matters in firms' environmental proactivity. In particular, firms with a higher percentage of state ownership present superior green proactivity, while ownership concentration appears negatively related to proactive environmental strategy.
The paper offers theoretical and practical implications. It focuses attention on a still underdeveloped research area, namely organizations and their relationship with the natural environment, including corporate ownership as a driver of a company's proactive environmental strategy. Copyright © 2014 John Wiley & Sons, Ltd and ERP Environment
This study aims to show that the effectiveness of corporate governance in improving firms’ environmental sustainability depends on the national institutional context. Using a sample of 210 firms from 14 countries in North America and Europe, our findings show that regulatory pressures discourage independent directors and separate board chairs to promote environmental sustainability whereas normative pressures have the opposite effect for these two governance mechanisms. We also found a positive moderating effect in relation to cognitive pressures for independent directors. We make a unique contribution to the literature by combining corporate governance and institutional factors to explain firms’ environmental sustainability. Although there is a growing consensus that institutions matter to corporate governance, there has been little research on how environmental institutional pressures may moderate the relationship between corporate governance mechanisms and environmental sustainability. Copyright © 2014 John Wiley & Sons, Ltd and ERP Environment
Manuscript Type
Empirical
Research Question/Issue
We investigate the impact of family equity holdings on three indicators of corporate social responsibility: environmental, social, and governance ( ESG ) rankings. We further evaluate how firm governance mediates the effect of family ownership on environmental and social improvements and how national governance systems influence the response of family holdings to ESG .
Research Findings/Insights
Based on a sample of 23,902 firm‐year observations drawn from 2002 to 2012 covering 46 countries and 3,893 firms, our findings show that both closely held equity and family ownership are negatively associated with ESG performance. When we control for governance, closely held equity is no longer associated with environmental and social rankings, but family ownership retains a significant negative association. These results are strong and consistent across liberal market economies ( LME ), whereas coordinated market economies ( CME ) exhibit generally weaker results and considerable diversity. J apan stands out as different from the other countries examined in depth.
Theoretical/Academic Implications
Our results are consistent with agency relationships driving decisions concerning ESG commitment in LMEs . They also emphasize the role of institutional differences given the weak and variable association between ownership and ESG in CMEs . We show that families may be able to influence decisions, possibly through participation in management, despite normally effective governance constraints. As the impact of ownership and governance varies across economies and ownership type, this implies that both agency and governance should be evaluated in the context of the economic environment.
Practitioner/Policy Implications
Our results offer insights to regulators and policy makers who intend to improve ESG performance. The results suggest that encouraging diversified ownership is particularly important in LMEs , that improvements in governance may benefit social and environmental performance where equity is closely held by institutions, but that governance may be less effective in the presence of family ownership.
This paper conducts an empirical study as to whether family firms are more socially responsible than their nonfamily counterparts and explores the conditions in which this difference in social behavior occurs. We argue that family firms, given their socioemotional wealth bias, have a positive effect on social dimensions linked to external stakeholders, yet have a negative impact on internal social dimensions. Thus, family firms can be socially responsible and irresponsible at the same time. We also suggest that institutional and organizational conditions act as catalysts in the relationship between firm type and corporate social responsibility (CSR). General support for our thesis that family firms neglect internal social dimensions came from the study of a sample of 598 listed European firms over a period of 4 years. Moreover, while national standards and industry conditions influence the degree of CSR in nonfamily firms, these factors do not affect family firms. However, family firms' social activities are more sensitive to declining organizational performance.
This paper explores the phenomenon of positive organizational deviance from institutional norms by establishing practices that protect or enhance the natural environment. Seeking to explain why some organizations practice positive environmental deviance while others do not, we locate our inquiry on the board of directors—the organizational body that interprets external issues and guides organizational response. We find a strong correlation between positive deviance and the past environmental experience of board directors and the centrality of the organization within field‐level networks. Organizations located on the periphery of the network or whose boards possess a high level of environmental experience are more likely to deviate in positive ways. Our conclusions contribute to multiple literatures in behavioral and environmental governance, the role of filtering and enaction in the process of institutional conformity and change, and the mechanisms behind proactive environmental protection strategies within business. Copyright © 2012 John Wiley & Sons, Ltd.
Despite the tremendous number of publications concerned with the relationship between corporate environmental performance (CEP) and corporate financial performance (CFP), inconsistent empirical findings persist and the overall picture remains vague. Drawing on a hybrid theoretical framework (combining the theoretical reasoning of the natural-resource-based view (NRBV) with instrumental stakeholder and slack resources arguments), we address the apparent lack of consensus by meta-analytically integrating the findings of 149 studies. We pay particular attention to two highly material issues: the direction of causality and the multidimensionality of the focal constructs. Meta-analytic results indicate that there is a positive and partially bidirectional relationship between CEP and CFP. In addition, our findings suggest that the relationship is stronger when the strategic approach underlying CEP is proactive rather than reactive. Furthermore, we reveal moderation effects of methodological artifacts, which may provide explanations for the inconsistency of the results of previous studies. Based on our findings, we discuss the implications and outline avenues for further research.
This study investigates how ownership concentration in European multinational firms is associated with these firms’ corporate social responsibility (CSR). We employ factor analysis on responsibility data from EIRiS and use a regression analysis. Using firm-level data for almost 700 European firms, we find that shareholder concentration is significantly related to such policies. That is, more concentrated ownership goes hand in hand with poorer CSR policies. In our analysis, we control for size, leverage, profitability, industry, and country of origin. We use several indicators for ownership concentration. We also find that with more concentrated ownership, CSR of the firm gets worse. We suggest that especially with large shareholders, CSR would need to be included in their performance assessment.
Based on Whitley’s “National Business Systems” (NBS) institutional framework (Whitley 1997; 1999), we theorize about and empirically investigate the impact of nation-level institutions on firms’ corporate social performance (CSP). Using a sample of firms from 42 countries spanning seven years, we construct an annual composite CSP index for each firm based on social and environmental metrics. We find that the political system, followed by the labor and education system, and the cultural system are the most important NBS categories of institutions that impact CSP. Interestingly, the financial system appears to have a relatively less significant impact. We discuss implications for research, practice and policy-making.
We analyze the social performance of a sample of publicly traded family and non-family firms. Using the KLD index of social performance, we find a negative relationship between family firm status and poor social performance. However, we find no evidence that corporate governance is related to firm social performance. Findings also provide evidence that corporate governance moderates the relationship between extent of family control and social performance.
abstractWe build on a stakeholder–agency theoretical perspective to explore the impact of particular corporate governance mechanisms on firm environmental performance. Our empirical evidence shows that several important corporate governance mechanisms such as the board of directors, managerial incentives, the market for corporate control, and the legal and regulatory system determine firms' environmental performance levels. These results suggest that these different governance mechanisms resolve, to some extent, the existing divergence of interests between stakeholders and managers with respect to environmental activities.
Each year, hundreds of firms are prosecuted for violating environmental laws and hundreds of millions of dollars in penalties are assessed. At the same time, a much larger number of firms escape the various costs associated with litigation by adhering to the provisions of the same laws and regulations. It is not a priori apparent why this dichotomy exists. In this paper we draw on corporate governance and stakeholder theories to empirically investigate environmental lawsuits. Specifically, we compare the pre-lawsuit profile of 209 violators to a sample of matched control firms between 1994 and 1998. We find that the likelihood of becoming a lawsuit defendant increases with board size, with the fraction of directors in industrial firms, and with the fraction of inside ownership, and decreases with the number of directorships held by outside directors. These findings are robust to alternative dependent variable specifications. Together, our results suggest that managers, researchers, and policy-makers need to direct their attention to the corporate board as the core decision-making unit forming corporate environmental policies. Copyright © 2002 John Wiley & Sons, Ltd.
In this paper, we investigate the relation between firm-level corporate governance and firm value based on a large and previously unused dataset from Governance Metrics International (GMI) comprising 6,663 firm-year observations from 22 developed countries over the peri-od from 2003 to 2007. Based on a set of 64 individual governance attributes we construct two alternative additive corporate governance indices with equal weights attributed to the governance attributes and one index derived from a principal component analysis. For all three indices we find a strong and positive relation between firm-level corporate governance and firm valuation. In addition, we investigate the value relevance of governance attributes that document the companies' social behavior. Regardless of whether these attributes are considered individually or aggregated into indices, and even when "standard" corporate governance attributes are controlled for, they exhibit a positive and significant effect on firm value. Our findings are robust to alternative calculation procedures for the corporate govern-ance indices and to alternative estimation techniques.
This paper, using observations from firms in emerging financial markets (EFM), examines the association between proxies for legal protection, law enforcement and corporate governance on country level scores for information asymmetry (IA). In addition, the paper also examines the association between differences in financial development of EFM and IA. IA is measured using a method developed by Jacobson and Aaker (1993) who argued that stock market participants, being forward-looking, not only react to information about business performance but also attempt to anticipate outcomes that will only later be reflected in accounting information. The measure applied seeks to assess the degree to which investors have information that allows them to anticipate future accounting results versus the extent that they react to current-term accounting results. Regression results show that firms in countries with strong legal protection/law enforcement and corporate governance are associated with lower IA. Firms in countries with more developed markets are also associated with lower IA levels.
Prior research has shown that family firms differ from non-family firms with regard to aggregate measures of corporate social responsibility (CSR). We argue that CSR is a multidimensional concept that comprises several aspects, which range from employee relations to ecological concerns and product issues. Based on an organizational and family identity perspective, we argue that the effect of family ownership can differ across various CSR dimensions. Family firms can be responsible and irresponsible regarding CSR at the same time. We use a dataset of large US firms to test our hypotheses. Our Bayesian regressions show that family ownership is negatively associated with community-related CSR performance and positively associated with diversity-, employee-, environment-, and product-related aspects of CSR. The largest positive effect of family ownership on CSR performance exists with regard to product-related aspects of CSR.