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Corporate political risk and environmental performance

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  • Safiullah, Md
  • Kabir, Md. Nurul

Abstract

We investigate the association between firm-level political risk and environmental performance in U.S. firms during the period 2004–2018. We find a negative impact of political risk on overall environmental performance and its three components (a) carbon emissions reduction; (b) production innovation; and (c) resource reduction. Our findings remain robust when we employ firm fixed-effects, propensity score-matching estimates and the instrumental variable approach to address potential endogeneity concerns. The channel analysis shows that firms with high political risk face higher cash flow volatility and higher default risk, which lead to lower environmental performance.

Suggested Citation

  • Safiullah, Md & Kabir, Md. Nurul, 2024. "Corporate political risk and environmental performance," Global Finance Journal, Elsevier, vol. 60(C).
    • Handle: RePEc:eee:glofin:v:60:y:2024:i:c:s1044028324000115
    DOI: 10.1016/j.gfj.2024.100939
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    More about this item

    Keywords

    Firm-level political risk; Environmental performance; Carbon emissions;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development

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