Can board environmental orientation improve U.S. firms' carbon performance? The mediating role of carbon strategy

Abstract

Overwhelming evidence from prior research suggests a positive association between corporate board characteristics and carbon performance; however, very little is known about the mechanisms linking the two variables. This study attempts to fill this gap by developing and empirically testing a conceptual model that highlights the role of carbon strategy in the relationship between board environmental orientation (BEO) and carbon performance. We argue that BEO can directly and indirectly influence carbon performance through carbon strategy. Using structural equation modelling to analyse data consisting of 2,301 US firm-year observations over the 2005-2015 period, we find that the greater the BEO is, the better its carbon performance (i.e., lower greenhouse gas emissions). The results also provide evidence of the mediating effect of carbon strategy on the relationship between BEO and carbon performance. Splitting the sample into high and low carbon-intensive industries shows a partial mediation effect in high carbon-intensive industries and a full mediation effect in low carbonintensive industries. The findings of the study and its implications for scholars, policy makers, managers, investors and environmentalists are discussed.

Connecting earnings management and corporate social responsibility: A renewed perspective

“…Principally, our results allow us to show how firms including women on their BoDs adopt fewer EM practices and exhibit better earnings quality (Hili & Affes, ; Lakhal, Aguir, Lakhal,& Malek, ). Additionally, our empirical findings support the idea that boardroom gender diversity as an instrument of CSP helps reduce engagement in EM practices (Moussa, Allam, Elbanna,& Bani‐Mustafa, ), in turn guaranteeing CSR and sustainable governance and strategizing (Maglio, Rey, Agliata, &Lombardi, ). Consistent with the previous literature, our findings reveal and confirm that female directors are effective in their monitoring roles, as they lower agency costs that emerge through EM.…”

“…Moussa, Allam, Elbanna, & Bani‐Mustafa () assumed that board gender diversity can serve as a measure of board environmental orientation (BEO). In assessing how BEO influences the CSP measured by carbon performance, the authors found that the “greater the BEO is, the better its carbon performance” (Moussa, Allam, Elbanna, & Bani‐Mustafa, , p. 1). Additionally, Boulouta () found that board gender diversity has a positive impact on overall CSP in focusing on 126 firms of the S&P500 group of companies.…”

“…Carter, Simkins & Simpson (2003) argued that a more heterogeneous BoD might serve as a better controlling device for managers to preserve board independence, ensuring the representation of shareholders' interests in the decision making process. Moussa, Allam, Elbanna, & Bani-Mustafa (2019) assumed that board gender diversity can serve as a measure of board environmental orientation (BEO). In assessing how BEO influences the CSP measured by carbon performance, the authors found that the "greater the BEO is, the better its carbon performance" (Moussa, Allam, Elbanna, & Bani-Mustafa, 2019, p. 1).…”

Corporate environmental performance, environmental management and firm risk

“…For the environmental pillar, a company is assigned 70 KPIs. Although the ASSET4 database was primarily designed for professional purposes, it has been commonly used in academic studies on sustainability‐related topics (e.g., Benlemlih, Shaukat, Qiu, & Trojanowski, ; Haque & Ntim, ; Hartmann & Vachon, ; Moussa, Allam, Elbanna, & Bani‐Mustafa, ; Stellner, Klein, & Zwergel, ).…”

“…Although the ASSET4 database was primarily designed for professional purposes, it has been commonly used in academic studies on sustainability-related topics (e.g., Benlemlih, Shaukat, Qiu, & Trojanowski, 2018;Haque & Ntim, 2018;Hartmann & Vachon, 2018;Moussa, Allam, Elbanna, & Bani-Mustafa, 2019;Stellner, Klein, & Zwergel, 2015). Table 1 presents the composition of the sample companies by sector and year.…”