Renewable Governance: Good for the Environment?
Renewable Governance: Good for the Environment?
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.
The article, Renewable Governance: Good for the Environment?, co-authored by Lukas Roth is a forthcoming publication in the Journal of Accounting Research.
Lukas Roth joined the faculty of the Alberta School of Business at the University of Alberta as an Assistant Professor in 2009 and was appointed Associate Professor of Finance in 2015 (with tenure). Lukas has held visiting positions at the Pennsylvania State University, University of Zurich, Swiss Federal Institute of Technology of Lausanne (EPFL), Università Cattolica, and Development Bank of Japan. Lukas’ research is focused primarily on corporate finance and sustainable finance. His research has been published in leading academic journals, including the Journal of Financial Economics, Review of Financial Studies, and Journal of Accounting Research, as well as practitioner-oriented journals, such as the Journal of Applied Corporate Finance. Lukas is currently teaching in the undergraduate, Master of Financial Management, and MAcc programs at the Alberta School of Business.