Does Managers’ Early Policy-Induced Adversity Affect Corporate ESG Performance? Evidence From China Sent-Down Youth Movement
52 Pages Posted: 21 Sep 2022
Date Written: August 25, 2022
Despite an extensive literature based on upper echelons theory and imprinting theory explores how top managers’ previous experience influence corporate behaviors, little is known about the impact of managers’ early policy-induced adversity experience on corporate social responsibility. This paper examines the relationship between top manager and board members experienced early policy-induced adversity and corporate ESG performance. Using top managers and board members' early-life "sent-down youth" experiences from 1957 to 1976 as a quasi-natural experiment, we find that top managers and board members experienced policy-induced adversity are associated with lower corporate ESG performance. Our evidences further shows that board members have more significantly negative impact on ESG performance than top managers. The results are stronger in the upper executives who works in state-owned enterprises (SOE). Additional tests show that firms governed by early policy-induced adversity experienced managers have higher market value as measured by Tobin's Q. Our findings are consistent with the view that ESG investment is a manifestation of agency problems.
Keywords: Upper echelons theory, ESG performance, Early-life experience, Agency problem, Sent-down youth movement
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