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Corporate governance and business strategies for climate change and environmental mitigation

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  • Raj Aggarwal
  • Sandra Dow

Abstract

Strategic corporate responses to climate change and environmental challenges do not seem to be the primary domain of corporate management. In the short run, such decisions are generally not consistent with executive incentives and often not seen as profit maximizing. Nevertheless, as some climate change responses may indeed be firm value maximizing, such decisions can be expected to reflect the nature of a firm's corporate governance. Based on an analysis of 500 of the largest US firms, we show empirically that this is indeed the case. Specifically, this study documents that institutional ownership and board entrenchment seem to significantly influence climate change and environmental impact mitigation policies of large firms.

Suggested Citation

  • Raj Aggarwal & Sandra Dow, 2012. "Corporate governance and business strategies for climate change and environmental mitigation," The European Journal of Finance, Taylor & Francis Journals, vol. 18(3-4), pages 311-331, April.
    • Handle: RePEc:taf:eurjfi:v:18:y:2012:i:3-4:p:311-331
    DOI: 10.1080/1351847X.2011.579745
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    Citations

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    Cited by:

    1. Chen, Qiu & Maung, Min & Shi, Yulin & Wilson, Craig, 2014. "Foreign direct investment concessions and environmental levies in China," International Review of Financial Analysis, Elsevier, vol. 36(C), pages 241-250.
    2. Stefan Lewandowski, 2017. "Corporate Carbon and Financial Performance: The Role of Emission Reductions," Business Strategy and the Environment, Wiley Blackwell, vol. 26(8), pages 1196-1211, December.
    3. Liang Li & Hajar Msaad & Huaping Sun & Mei Xuen Tan & Yeqing Lu & Antonio K.W. Lau, 2020. "Green Innovation and Business Sustainability: New Evidence from Energy Intensive Industry in China," IJERPH, MDPI, vol. 17(21), pages 1-18, October.
    4. Amore, Mario Daniele & Bennedsen, Morten, 2016. "Corporate governance and green innovation," Journal of Environmental Economics and Management, Elsevier, vol. 75(C), pages 54-72.
    5. Walid Ben‐Amar & Mathieu Gomes & Hania Khursheed & Sylvain Marsat, 2022. "Climate change exposure and internal carbon pricing adoption," Business Strategy and the Environment, Wiley Blackwell, vol. 31(7), pages 2854-2870, November.
    6. Beatriz Aibar‐Guzmán & Nicola Raimo & Filippo Vitolla & Isabel‐María García‐Sánchez, 2024. "Corporate governance and financial performance: Reframing their relationship in the context of climate change," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 31(3), pages 1493-1509, May.
    7. Aggarwal, Raj & Jindal, Varun & Seth, Rama, 2019. "Board diversity and firm performance: The role of business group affiliation," International Business Review, Elsevier, vol. 28(6), pages 1-1.
    8. Ji, Xinru & Chen, Xiaoxu & Ao, Zhiming, 2024. "ESG rating, board faultlines, and corporate performance," Research in International Business and Finance, Elsevier, vol. 72(PB).
    9. Tzouvanas, Panagiotis & Kizys, Renatas & Chatziantoniou, Ioannis & Sagitova, Roza, 2020. "Environmental and financial performance in the European manufacturing sector: An analysis of extreme tail dependency," The British Accounting Review, Elsevier, vol. 52(6).
    10. Salvador Acha & Aitor Soler & Nilay Shah, 2021. "Best practices to mitigate CO2 operational emissions: A case study of the Basque Country energy ecosystem," EKONOMIAZ. Revista vasca de Economía, Gobierno Vasco / Eusko Jaurlaritza / Basque Government, vol. 99(01), pages 183-211.
    11. Tzouvanas, Panagiotis & Mamatzakis, Emmanuel C., 2021. "Does it pay to invest in environmental stocks?," International Review of Financial Analysis, Elsevier, vol. 77(C).
    12. Roel Brouwers & Frederiek Schoubben & Cynthia Van Hulle, 2018. "The influence of carbon cost pass through on the link between carbon emission and corporate financial performance in the context of the European Union Emission Trading Scheme," Business Strategy and the Environment, Wiley Blackwell, vol. 27(8), pages 1422-1436, December.
    13. Andrej Miklosik & Peter Starchon & Milos Hitka, 2021. "Environmental sustainability disclosures in annual reports of ASX Industrials List companies," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 23(11), pages 16227-16245, November.
    14. Qingxia (Jenny) Wang, 2023. "Financial effects of carbon risk and carbon disclosure: A review," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(4), pages 4175-4219, December.
    15. Daniel Reimsbach & Geert Braam, 2023. "Creating social and environmental value through integrated thinking: International evidence," Business Strategy and the Environment, Wiley Blackwell, vol. 32(1), pages 304-320, January.
    16. Ryo Aruga & Keiichi Goshima & Takashi Chiba, 2022. "CO2 Emissions and Corporate Performance: Japan's Evidence with Double Machine Learning," IMES Discussion Paper Series 22-E-01, Institute for Monetary and Economic Studies, Bank of Japan.
    17. Ellen Pei‐yi Yu & Christine Qian Guo & Bac Van Luu, 2018. "Environmental, social and governance transparency and firm value," Business Strategy and the Environment, Wiley Blackwell, vol. 27(7), pages 987-1004, November.
    18. Flori, Andrea & Borghesi, Simone & Marin, Giovanni, 2024. "The environmental-financial performance nexus of EU ETS firms: A quantile regression approach," Energy Economics, Elsevier, vol. 131(C).
    19. Dewan Muktadir‐Al‐Mukit & Firoz Haroon Bhaiyat, 2024. "Impact of corporate governance diversity on carbon emission under environmental policy via the mandatory nonfinancial reporting regulation," Business Strategy and the Environment, Wiley Blackwell, vol. 33(2), pages 1397-1417, February.
    20. Saleh F.A. Khatib & Hamzeh Al Amosh, 2024. "Corporate Governance, Management Environmental Training, and Carbon Performance: The UK Evidence," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(3), pages 14787-14809, September.
    21. Kang, Sang Baum & Létourneau, Pascal, 2016. "Investors’ reaction to the government credibility problem: A real option analysis of emission permit policy risk," Energy Economics, Elsevier, vol. 54(C), pages 96-107.
    22. Tzouvanas, Panagiotis & Kizys, Renatas & Chatziantoniou, Ioannis & Sagitova, Roza, 2020. "Environmental disclosure and idiosyncratic risk in the European manufacturing sector," Energy Economics, Elsevier, vol. 87(C).
    23. Monomita Nandy & Suman Lodh & Jin Wang & Jaskaran Kaur, 2021. "Does lobbying of firms complement executive networks in determining executive compensation?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(3), pages 4137-4162, July.
    24. Wang, He-tong & Qi, Shao-zhou & Li, Kai, 2023. "Impact of risk-taking on enterprise value under extreme temperature: From the perspectives of external and internal governance," Journal of Asian Economics, Elsevier, vol. 84(C).
    25. Monica Singhania & Dimple Gupta, 2024. "Impact of Environmental, Social and Governance (ESG) disclosure on firm risk: A meta‐analytical review," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 31(4), pages 3573-3613, July.

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