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The effects of board characteristics and sustainable compensation policy on carbon performance of UK firms

The effects of board characteristics and sustainable compensation policy on carbon performance of UK firms
The effects of board characteristics and sustainable compensation policy on carbon performance of UK firms
This study examines the effects of board characteristics and sustainable compensation policy on carbon reduction initiatives and greenhouse gas (GHG) emissions of a firm. We use firm fixed effect model to analyse data from 256 non-financial UK firms covering a period of 13 years (2002–2014). Our estimation results suggest that board independence and board gender diversity have positive associations with carbon reduction initiatives. In addition, environment-social-governance based compensation policy is found to be positively associated with carbon reduction initiatives. However, we do not find any relationship between corporate governance variables and GHG emissions of a firm. Overall, our evidence suggests that corporate boards and executive management tend to focus on a firm's process-oriented carbon performance, without improving actual carbon performance in the form of reduced GHG emissions. The findings have important implications for practitioners and policymakers with respect to the effectiveness of internal corporate governance mechanisms in addressing climate change risks, and possible linkage between corporate governance reform and carbon related policies.
0890-8389
347-364
Haque, Faizul
8153d83c-427a-4f73-860d-dd7e9460533d
Haque, Faizul
8153d83c-427a-4f73-860d-dd7e9460533d

Haque, Faizul (2017) The effects of board characteristics and sustainable compensation policy on carbon performance of UK firms. British Accounting Review, 49 (3), 347-364. (doi:10.1016/j.bar.2017.01.001).

Record type: Article

Abstract

This study examines the effects of board characteristics and sustainable compensation policy on carbon reduction initiatives and greenhouse gas (GHG) emissions of a firm. We use firm fixed effect model to analyse data from 256 non-financial UK firms covering a period of 13 years (2002–2014). Our estimation results suggest that board independence and board gender diversity have positive associations with carbon reduction initiatives. In addition, environment-social-governance based compensation policy is found to be positively associated with carbon reduction initiatives. However, we do not find any relationship between corporate governance variables and GHG emissions of a firm. Overall, our evidence suggests that corporate boards and executive management tend to focus on a firm's process-oriented carbon performance, without improving actual carbon performance in the form of reduced GHG emissions. The findings have important implications for practitioners and policymakers with respect to the effectiveness of internal corporate governance mechanisms in addressing climate change risks, and possible linkage between corporate governance reform and carbon related policies.

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More information

Accepted/In Press date: 6 January 2017
e-pub ahead of print date: 6 January 2017
Published date: 1 May 2017

Identifiers

Local EPrints ID: 446785
URI: http://eprints.soton.ac.uk/id/eprint/446785
ISSN: 0890-8389
PURE UUID: 33a3e390-ae34-4ecb-a298-5f158f1eda6f

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Date deposited: 22 Feb 2021 17:33
Last modified: 22 Feb 2021 17:33

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