Corporate political risk and environmental performance

Md Safiullah and Md. Nurul Kabir

Global Finance Journal, 2024, vol. 60, issue C

Abstract: We investigate the association between firm-level political risk and environmental performance in U.S. firms during the period 2004–2018. We find a negative impact of political risk on overall environmental performance and its three components (a) carbon emissions reduction; (b) production innovation; and (c) resource reduction. Our findings remain robust when we employ firm fixed-effects, propensity score-matching estimates and the instrumental variable approach to address potential endogeneity concerns. The channel analysis shows that firms with high political risk face higher cash flow volatility and higher default risk, which lead to lower environmental performance.

Keywords: Firm-level political risk; Environmental performance; Carbon emissions (search for similar items in EconPapers)
JEL-codes: G3 M14 Q01 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:glofin:v:60:y:2024:i:c:s1044028324000115

DOI: 10.1016/j.gfj.2024.100939

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