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Corporate executives’ incentives and ESG performance

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  • Jang, Ga-Young
  • Kang, Hyoung-Goo
  • Kim, Woojin

Abstract

This study investigates the effect of managers' manipulative tendencies on firms’ environmental, social, and governance (ESG) performance using the share pledging and earnings management data from FY2015 to FY2020. We find that corporate executives’ share pledging activities negatively affect firms’ ESG performance. The effect is salient for the environmental and social but governance criteria. Furthermore, we find weak evidence for the relationship between earnings management and ESG performance. The results imply that the managers who manage earnings in order to increase their monetary income may care less about ESG performance that is not strongly aligned to their compensation.

Suggested Citation

  • Jang, Ga-Young & Kang, Hyoung-Goo & Kim, Woojin, 2022. "Corporate executives’ incentives and ESG performance," Finance Research Letters, Elsevier, vol. 49(C).
    • Handle: RePEc:eee:finlet:v:49:y:2022:i:c:s1544612322003932
    DOI: 10.1016/j.frl.2022.103187
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    References listed on IDEAS

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    Cited by:

    1. Bai, Keke & Jing, Kun & Li, Tianyu, 2024. "Corporate ESG Performance and Stock Pledge Risk," Finance Research Letters, Elsevier, vol. 60(C).
    2. Zeng, Yongliang & Zhao, Xiangfang & Zhu, Yiwen, 2023. "Equity incentives and ESG performance: Evidence from China," Finance Research Letters, Elsevier, vol. 58(PC).
    3. Yin, Zhichao & Li, Xinqi & Si, Dengkui & Li, Xiaolin, 2023. "China stock market liberalization and company ESG performance: The mediating effect of investor attention," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 1396-1414.
    4. Yang Liu & Han Zhang & Fukang Zhang, 2024. "The power of CEO growing up in poverty: Enabling better corporate environmental, social, and governance (ESG) performance," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 31(3), pages 1610-1633, May.
    5. Qian, Shuitu & Yu, Wenzhe, 2024. "Green finance and environmental, social, and governance performance," International Review of Economics & Finance, Elsevier, vol. 89(PA), pages 1185-1202.
    6. Zhang, Yanan & Zhang, Xiaoyu, 2024. "Top management team functional diversity and ESG performance," Finance Research Letters, Elsevier, vol. 63(C).
    7. Huang, Jun & Han, Feifei & Li, Yun, 2023. "Government as major customer: The effects of government procurement on corporate environmental, social, and governance performance," Finance Research Letters, Elsevier, vol. 54(C).
    8. Wang, Qi & Ma, Zhong & Wang, Xinyue & Wu, Di, 2024. "State shareholding in privately-owned enterprises and their ESG performance: Evidence from China," Finance Research Letters, Elsevier, vol. 60(C).
    9. Tian, Zhongliang & Tang, Ruoyuan & Liu, Wenhe & Qi, Yuan, 2024. "Controlling shareholder's equity pledge and corporate financialization," Finance Research Letters, Elsevier, vol. 60(C).

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