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Corporate pollution and reputational exposure

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  • Georgios Chortareas
  • Fangyuan Kou
  • Alexia Ventouri

Abstract

We study the empirical association between corporate pollution and reputational exposure using a sample of 745 U.S. firms from 2007 to 2019 and an ordered probit model. Our results reveal an inverse relationship between chemical emissions and reputational exposure rating, after controlling for various firm attributes. We examine the roles of corporate governance structure and the demographic background of the top management team in the transmission process from polluting chemical emissions to reputation. Further, the negative impact of corporate pollution on reputational exposure rating is much stronger in areas where residents are convinced that climate change is happening. We perform several tests and analyses designed to mitigate endogeneity issues and correct sample bias to ensure the robustness of our findings. Finally, our results suggest that the negative effect is stronger for companies with higher information asymmetry, which indicates the importance of information transparency for firms' credibility.

Suggested Citation

  • Georgios Chortareas & Fangyuan Kou & Alexia Ventouri, 2024. "Corporate pollution and reputational exposure," Financial Markets, Institutions & Instruments, John Wiley & Sons, vol. 33(2), pages 149-178, May.
    • Handle: RePEc:wly:finmar:v:33:y:2024:i:2:p:149-178
    DOI: 10.1111/fmii.12190
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