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The cost of hypocrisy: Does corporate ESG decoupling reduce labor investment efficiency?

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  • Di, Ran
  • Li, Changqing

Abstract

This study finds that ESG decoupling reduces labor investment efficiency mainly by increasing financial constraints and agency costs. ESG decoupling exacerbates both labor overinvestment and labor underinvestment. And environmental uncertainty might exacerbate the negative effect of ESG decoupling on firms.

Suggested Citation

  • Di, Ran & Li, Changqing, 2023. "The cost of hypocrisy: Does corporate ESG decoupling reduce labor investment efficiency?," Economics Letters, Elsevier, vol. 232(C).
    • Handle: RePEc:eee:ecolet:v:232:y:2023:i:c:s0165176523003804
    DOI: 10.1016/j.econlet.2023.111355
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    References listed on IDEAS

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    1. Yupei Liu & Weian Li & Qiankun Meng, 2023. "Influence of distracted mutual fund investors on corporate ESG decoupling: evidence from China," Sustainability Accounting, Management and Policy Journal, Emerald Group Publishing Limited, vol. 14(1), pages 184-215, January.
    2. Marianne Bertrand & Sendhil Mullainathan, 2003. "Enjoying the Quiet Life? Corporate Governance and Managerial Preferences," Journal of Political Economy, University of Chicago Press, vol. 111(5), pages 1043-1075, October.
    3. Eun-Hee Kim & Thomas P. Lyon, 2015. "Greenwash vs. Brownwash: Exaggeration and Undue Modesty in Corporate Sustainability Disclosure," Organization Science, INFORMS, vol. 26(3), pages 705-723, June.
    4. Andrés Donangelo, 2014. "Labor Mobility: Implications for Asset Pricing," Journal of Finance, American Finance Association, vol. 69(3), pages 1321-1346, June.
    5. Ben-Nasr, Hamdi & Alshwer, Abdullah A., 2016. "Does stock price informativeness affect labor investment efficiency?," Journal of Corporate Finance, Elsevier, vol. 38(C), pages 249-271.
    6. Boochun Jung & Woo†Jong Lee & David P. Weber, 2014. "Financial Reporting Quality and Labor Investment Efficiency," Contemporary Accounting Research, John Wiley & Sons, vol. 31(4), pages 1047-1076, December.
    7. Yu, Ellen Pei-yi & Luu, Bac Van & Chen, Catherine Huirong, 2020. "Greenwashing in environmental, social and governance disclosures," Research in International Business and Finance, Elsevier, vol. 52(C).
    8. Peihua Fan & Mingjun Hou, 2022. "Is there a gap between saying and doing in CSR? Cases from Asian firms," Asia Pacific Business Review, Taylor & Francis Journals, vol. 28(4), pages 606-615, August.
    9. María D. Odriozola & Elisa Baraibar‐Diez, 2017. "Is Corporate Reputation Associated with Quality of CSR Reporting? Evidence from Spain," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 24(2), pages 121-132, March.
    10. Cao, Zhangfan & Rees, William, 2020. "Do employee-friendly firms invest more efficiently? Evidence from labor investment efficiency," Journal of Corporate Finance, Elsevier, vol. 65(C).
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Hongyang Zhao & Dongmei Wang & Zhihong Zhang & Xiangrong Hao, 2024. "Does the Classified Reform of Chinese State-Owned Enterprises Alleviate Environmental, Social and Governance Decoupling?," Sustainability, MDPI, vol. 16(23), pages 1-29, December.
    2. Adwan, Sami, 2024. "Does employee ownership improve labour investment efficiency? Evidence from European firms," Economics Letters, Elsevier, vol. 238(C).
    3. Xiangyu Chen & Peng Wan & Zhefeng Ma & Yu Yang, 2024. "Does corporate digital transformation restrain ESG decoupling? Evidence from China," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-15, December.

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    More about this item

    Keywords

    ESG decoupling; Labor investment efficiency; Financial constraint; Agency cost;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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