The impact of CEO hedging on corporate ESG performance: Evidence from the United States

Yanuo Wang, Zhengying Xie, Haipeng Geng and Jorry Croce

Finance Research Letters, 2024, vol. 69, issue PA

Abstract: Corporate ESG performance is increasingly recognized as crucial for sustainable development, yet the impact of CEO behavior on this metric remains understudied. This paper investigates how CEO hedging affects corporate ESG performance, addressing a significant gap in the literature. Using data from U.S. listed companies from 2013 to 2021, we employ regression analysis and propensity score matching to examine this relationship. Our findings reveal that CEO hedging significantly reduces corporate ESG performance. Further analysis shows that the CEO's shareholding ratio and corporate risk enhance this negative correlation, while external supervision mitigates it. Heterogeneity analysis indicates a stronger correlation in low-polluting enterprises. These results underscore the ethical implications of CEO option trading for personal risk hedging and highlight the importance of avoiding behaviors that can adversely affect a firm's ESG performance. Our study contributes to the understanding of corporate governance and sustainable development, offering valuable insights for policymakers and corporate leaders in designing effective strategies to enhance ESG performance.

Keywords: Ceo hedging; Corporate esg performance; Shareholding ratio; corporate risk (search for similar items in EconPapers)
JEL-codes: G34 M14 O16 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:69:y:2024:i:pa:s1544612324010973

DOI: 10.1016/j.frl.2024.106067

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