Does CEO Risk-Aversion Affect Carbon Emission?

Ashrafee Hossain (), Samir Saadi () and Abu S. Amin ()
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Ashrafee Hossain: Memorial University of Newfoundland
Samir Saadi: University of Ottawa
Abu S. Amin: Central Michigan University

Journal of Business Ethics, 2023, vol. 182, issue 4, No 14, 1198 pages

Abstract: Abstract Does CEO tolerance to risk affect a firm’s long-run sustainability? Using CEO insider debt holding, we show that CEO’s risk-aversion encourages immoral yet rational decisions of emitting more greenhouse gas thereby adversely affecting the firm’s long-run sustainability. Our result is robust to several endogeneity tests including a quasi-natural experiment. Our finding also suggest that to mitigate potential adverse reactions from stakeholders, carbon emitting firms with risk-averse CEOs tend to spend more on CSR activities. Much of the heterogeneity in our results are attributed to companies with weaker governance, powerful CEOs, and operating in a competitive product market. Overall, contrary to conventional wisdom, CEO preference toward risk-aversion can often lead to unethical outcomes (environmental degradation) and especially appears to be a key determinant for firm-level carbon emissions.

Keywords: CEO inside debt; Executive compensation; Carbon risk; GHG emission; CSR (search for similar items in EconPapers)
JEL-codes: G34 M12 M14 Q51 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (14)

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DOI: 10.1007/s10551-021-05031-8

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