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Do co-opted boards protect CEOs from ESG controversies?

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  • Ghafoor, Abdul
  • Gull, Ammar Ali

Abstract

We investigate the relationship between board co-option and ESG controversies using a large sample of U.S. firms from 2002 to 2018. Contrary to prior studies documenting the potential consequences of co-opted boards on organizational outcomes, we document the positive role of co-opted directors. Specifically, the CEOs of firms with a higher proportion of co-opted directors are subject to fewer ESG controversies. Our findings provide significant implications for stakeholders, redirecting the narrative on board co-option.

Suggested Citation

  • Ghafoor, Abdul & Gull, Ammar Ali, 2024. "Do co-opted boards protect CEOs from ESG controversies?," Finance Research Letters, Elsevier, vol. 63(C).
    • Handle: RePEc:eee:finlet:v:63:y:2024:i:c:s1544612324002939
    DOI: 10.1016/j.frl.2024.105263
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    References listed on IDEAS

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    1. Chintrakarn, Pandej & Jiraporn, Pornsit & Sakr, Sameh & Lee, Sang Mook, 2016. "Do co-opted directors mitigate managerial myopia? Evidence from R&D investments," Finance Research Letters, Elsevier, vol. 17(C), pages 285-289.
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    5. Zaman, Rashid & Atawnah, Nader & Baghdadi, Ghasan A. & Liu, Jia, 2021. "Fiduciary duty or loyalty? Evidence from co-opted boards and corporate misconduct," Journal of Corporate Finance, Elsevier, vol. 70(C).
    6. Gregor Dorfleitner & Christian Kreuzer & Christian Sparrer, 2020. "ESG controversies and controversial ESG: about silent saints and small sinners," Journal of Asset Management, Palgrave Macmillan, vol. 21(5), pages 393-412, September.
    7. Ghafoor, Abdul & Šeho, Mirzet & Sifat, Imtiaz, 2023. "Co-opted board and firm climate change risk," Finance Research Letters, Elsevier, vol. 52(C).
    8. Gennaro Bernile & Vineet Bhagwat & P. Raghavendra Rau, 2017. "What Doesn't Kill You Will Only Make You More Risk-Loving: Early-Life Disasters and CEO Behavior," Journal of Finance, American Finance Association, vol. 72(1), pages 167-206, February.
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