Template-Type: ReDIF-Paper 1.0
Author-Name: Giulio Cornelli
Author-X-Name-First: Giulio
Author-X-Name-Last: Cornelli
Author-Name: Magdalena Erdem
Author-X-Name-First: Magdalena
Author-X-Name-Last: Erdem
Author-Name: Egon Zakrajsek
Author-X-Name-First: Egon
Author-X-Name-Last: Zakrajsek
Title: CEO turnover risk and firm environmental performance
Abstract: We investigate the relationship between the probability of a CEO forced-turnover and firm performance on several environmental dimensions. Our findings suggest that a higher risk of being terminated for the CEO is correlated with a lower  environmental ranking, particularly on environmental innovation activities, and more ESG controversies for the firm. The inclusion of ESG-pay clauses in executives' compensation packages only marginally offsets such deterioration. Looking at data on Greenhouse gas (GHG) emissions, we consistently find that a rise in the probability of being terminated corresponds to an increase in scope 2 and 3 emissions ("carbon leakeage"), whereas scope 1 emissions remain unchanged. Through an  instrumental variable approach, we trace the deterioration of firms' ESG controversies- and environmental innovation scores to a strategical re-orientation towards short-terminism.
Creation-Date: 2024-05
File-URL: https://www.bis.org/publ/work1190.pdf
File-Format: Application/pdf
File-Function: Full PDF document
File-URL: https://www.bis.org/publ/work1190.htm
File-Format: text/html
Number: 1190
Keywords: corporate finance, ESG, emissions, environmental innovation, short-terminism
Classification-JEL: D22, G30, G34, O31, Q55
Handle: RePEc:bis:biswps:1190