Executive Compensation and Environmental Performance: Evidence from CEO inside Debt

M. Benlemlih, Yiwei Li and Cynthia Assaf
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M. Benlemlih: Métis Lab EM Normandie - EM Normandie - École de Management de Normandie = EM Normandie Business School
Yiwei Li: Essex Business School - University of Essex
Cynthia Assaf: ESSCA - ESSCA – École supérieure des sciences commerciales d'Angers = ESSCA Business School

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Abstract: In this paper, we explore the relationship between CEO inside debt and environmental performance in the US. We provide strong and robust evidence that CEO inside debt significantly improves firms' use of water, energy, and materials, and their commitment to and effectiveness in reducing environmental emissions. We also report that variations in inside debt significantly influence the evolution of environmental performance and incentivize the production of less pollution. Additional analyses reveal that the relationship between CEO inside debt and environmental performance is stronger in firms with high CEO power, low institutional ownership, and less socially responsible investors. Taken together, our results highlight the important role of CEO compensation in improving firms' engagement in favor of the climate. © 2022 Elsevier B.V.

Keywords: carbon emission; CEO inside debt; CEO power; Compensation performance; debt; energy efficiency; energy market; Environmental emissions; Environmental management; Environmental performance; Executive compensation; institutional framework; Institutional ownership; Institutional ownerships; Power; power generation; Power low; United States; Water energy (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

Published in Energy Economics, 2022, 116, ⟨10.1016/j.eneco.2022.106403⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04454680

DOI: 10.1016/j.eneco.2022.106403

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