The impact of CEO attributes on firm-level climate-change disclosure: Evidence from United States

The impact of CEO attributes on firm-level climate-change disclosure: Evidence from United States

This thesis examines the association between corporate governance traits (i.e. CEO power, CEO-director ties and managerial ability) and the extent of firm-level climate change disclosure. Using a sample of 3,512 U.S. firm-year observations from 2006–2018, the study finds that firms with more powerful CEOs disclose less climate change information. Furthermore, it finds that CEO–director social ties are positively associated with firm-level climate change disclosure. Finally, firms with more capable managers tend to make more climate change disclosures. Additionally, this research examines the moderating role of internal (e.g., corporate governance) and external monitoring (e.g., financial analysts’ coverage) on the relationship between CEO power, CEO-director ties and managerial ability and climate change disclosure. The study finds that the negative and statistically significant relationship between CEO power and climate change disclosure is weakened when firms have higher institutional ownership and followed by a high number of analysts. This relationship is also weakened when firms suffer from low quality internal monitoring. The study also finds that both external monitoring and internal monitoring accentuate the positive impact of CEO–director social ties on climate change disclosure. Finally, the significant positive association between managerial ability and climate change disclosure is weakened when firms suffer from weak corporate governance. The results remain robust using a battery of robustness tests including reverse causality, observable and unobservable selection bias. Further, the study utilises state-level government party ideology as an exogeneous policy shock to address endogeneity. Additional analysis finds that climate change disclosure mediates the relationship between CEO power, CEO-director ties and managerial ability and firm value. Given the growing importance of integrating climate change-related information into a firm’s operations and the pressure exerted by various stakeholders, understanding the drivers of climate change disclosures is an important and emerging area of research in the accounting and finance literature. To the best of our knowledge, this is the first study to examine any link between managerial ability and climate change disclosures. Considering the recent pressure imposed on companies by regulatory authorities for more climate change disclosures, the study’s findings have important implications for regulators, policy makers, investors, financial analysts, researchers and firms.

File reproduced in accordance with the copyright policy of the publisher/author.