From the executive suite to the environment: How does CEO power affect climate change disclosures?

From the executive suite to the environment: How does CEO power affect climate change disclosures?

This study examines the relationship between CEO power and corporate climate change disclosure and the moderating role of internal and external monitoring in this relationship. Using a sample of 3,512 United States firm-year observations, we find that firms with more powerful CEOs disclose less climate change information. However, this negative relationship is mitigated in firms with higher institutional ownership, greater financial analyst coverage, and stronger internal governance. Our results remain robust across a series of tests designed to address both observable and unobservable selection biases, as well as omitted variable biases. Further analysis reveals that reduced firm-level transparency is an underlying channel through which CEO power diminishes climate change disclosures. Additionally, we document that climate change disclosure acts as an underlying mechanism linking CEO power to firm value. The findings of our study have important implications for regulators, policymakers, researchers, investors, analysts, and company management, especially in the context of increasing regulatory pressure on firms to enhance their climate change disclosures.