From the Executive Suite to the Environment: Assessing the Impact of CEO Power on Climate Change Disclosures

Abstract

We examine the relationship between CEO power and corporate climate change disclosure, as well as the moderating role of internal and external monitoring in this relationship. Using a sample of 3,512 United States (US) firm-year observations from 2007-2021, we find that firms with more powerful CEOs disclose less climate change information. This negative relationship is mitigated when firms have higher institutional ownership, are monitored by a larger number of financial analysts, and when they suffer from low-quality internal monitoring. Our results remain robust through a battery of robustness tests on reverse causality and both observable and unobservable selection biases. Further analysis suggests that climate change disclosure mediates the relationship between CEO power and firm value. The findings of our study hold significant implications for regulators, policymakers, researchers, investors, analysts, and company management, especially in the context of increasing regulatory pressure on companies to disclose more information about climate change.

Keywords: CEO power, Climate change disclosures, Governance, firm value