Director Expertise And Corporate Sustainability
50 Pages Posted: 24 Apr 2020 Last revised: 6 Mar 2023
Date Written: March 5, 2023
We show that U.S. firms increase their sustainability performance when their directors acquire expertise through their exposure to sustainability reforms in foreign countries where they serve as directors. Our results suggest that a board that gains sustainability expertise increases a firm’s overall sustainability performance by 7.1%. The increase in sustainability comes both from improvements in environmental and social practices. Directors also consider the tradeoffs between sustainability improvements and firm characteristics, with boards having a stronger impact on sustainability in firms from clean industries and firms that face fewer operational and financial constraints.
Keywords: Sustainability, Environmental, Social, E&S, Directors, Boards, Regulation
JEL Classification: F30, G15, G34
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