Carbon Embedded Governance: Effects on Disclosure and Performance
Posted: 2 Jan 2018
Date Written: December 24, 2017
Although prior research has examined corporate governance, few studies explicitly examine governance dedicated to sustainability issues. This paper examines (i) the combined impact of different carbon-embedded governance mechanisms (CGM) on carbon disclosure and (ii) the effect of CGM on the carbon performance-disclosure relationship. Using 361 observations from S&P500 firms from 2013 to 2015, we find CGM increase the alignment between carbon performance and carbon disclosure. Strong climate governance reduces over-acclaiming of good performance via extensive disclosure and low-polluters disclose more to differentiate themselves. Our findings highlight the importance of the frequency of reporting to boards, and of both monetary and non-monetary incentive schemes for improving carbon performance and disclosure. Overall, the results suggest that, in contrast to traditional governance structures (such as board independence, size, and diversity), CGM better reflect firms’ commitment to addressing sustainability issues and providing more transparent reporting and accountability to stakeholders.
Keywords: carbon governance; climate change; performance; disclosure; sustainability
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