Managerial Career Concerns and Corporate Environmental Policies

Utilizing quasi-exogenous contractions in CEOs’ external job opportunities following the staggered adoption of the Inevitable Disclosure Doctrine (IDD) across U.S. state courts, we investigate the impact of CEO career concerns on corporate environmental policies. Our findings indicate that after IDD adoption in a firm’s headquartered state, toxic chemical emissions from its affiliated facilities increase. This rise in emissions is particularly pronounced in firms where CEOs face significant dismissal risks and is positively associated with concurrent improvements in financial performance. Additionally, firms respond to IDD by strategically increasing emissions in states with lax environmental regulations. We also examine the moderating effects of CEOs’ tenure, pre-IDD job mobility, past financial performance, financial constraints, corporate governance, and institutional ownership. Overall, our results suggest that the fear of job loss drives CEOs to prioritize short-term financial gains over long-term value and reputation.