Renewable Governance: Good for the Environment?

Alexander Dyck, Karl V. Lins, Lukas Roth, Mitch Towner, Hannes F. Wagner

Research output: Contribution to journalArticlepeer-review

12 Scopus citations

Abstract

We conjecture that board renewal mechanisms—those substantive enough to renew the thinking of the board—are required before investors can address the mismatch between their preferences regarding environmental sustainability and what insiders at firms are actually doing. We identify the adoption of majority voting for directors and the introduction of a female director as two corporate governance mechanisms potentially strong enough to renew a board's thinking on sustainability. Using a sample of 3,293 firms from 41 countries, along with quasi-exogenous shocks to board renewal mechanisms in Canada and France, we find that both board renewal mechanisms are associated with significantly higher future environmental performance. Further tests provide suggestive evidence that board renewal is more strongly associated with environmental performance in settings with better institutions and more motivated institutional investors. These results suggest the importance of board renewal for alignment of firm policies with investor preferences around the world.

Original languageEnglish (US)
Pages (from-to)279-327
Number of pages49
JournalJournal of Accounting Research
Volume61
Issue number1
DOIs
StatePublished - Mar 2023

Keywords

  • ESG
  • corporate governance
  • corporate social responsibility
  • environmental performance
  • ownership structure
  • sustainability

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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