Attend the 2024 Annual Conference: 2-4 September at Singapore Management University. Register Now.

HomePaperManagerial Career Concerns and Corporate Environmental Policies

Managerial Career Concerns and Corporate Environmental Policies

13 February 2024
Authors: Chang-Mo Kang (Hanyang University), Donghyun Kim (Chung-Ang University) and Taehyun Kim (Chung-Ang University)
Presenter: Chang-Mo Kang (Hanyang University)

Utilizing the events of the staggered adoption of the Inevitable Disclosure Doctrine (IDD) injunction grants across the U.S. state courts as a lens to examine quasi-exogenous shifts in CEOs’ external job opportunities, we investigate the impact of managerial career concerns on corporate environmental policies. We find that, following the court’s adoption of IDD in the state where the parent company is headquartered, firms demonstrate an increase in toxic chemical emissions from their owned production facilities. This effect of IDD on toxic emissions is more pronounced when the CEOs are on the verge of forced replacements, trailing industry peers in financial performance, in the early stage of their careers, and more likely to transition to other firms without IDD. The results indicate that concerns about potential job loss (i.e., downside career concerns) prompt CEOs to prioritize short-term financial performance over long-term value or reputational considerations. The IDD-induced effect is more prominent for firms with larger toxic emission amount, heightened trade secrecy, tighter financial constraints, weaker managerial monitoring, and larger ownership of transient or activist funds. We also find that firms strategically respond to the adoption of IDD by increasing emissions solely in facilities located in states with lax environmental regulations. Overall, our results underscore the influence of implicit managerial labor market incentives on corporate environmental policies.

You May Also Like:

5 July 2024
Login to your account