The impact of business group affiliation on CO2 emissions: evidence from Chile

Abstract

PurposeThis study aims to investigate the relationship between business group affiliation and CO2 emissions in Chile, providing insights into the pollution externalities associated with business group structures and their implications for environmental performance.Design/methodology/approachA hand-matched sample of industrial facilities and subsidiaries of listed firms in Chile was utilized to analyze the CO2 emissions of business group-affiliated firms compared to stand-alone firms. Fixed-effect regression analysis and propensity score matching were employed to examine the differences in emissions levels.FindingsThe results suggest that firms affiliated with business groups have higher CO2 emissions in comparison to similar stand-alone firms. This suggests that business group structures may weaken the pressures for emission reduction and maintenance of public legitimacy among affiliated firms.Research limitations/implicationsThe findings of this study are subject to certain limitations, such as the use of a specific dataset from Chile and the inability to explore certain factors due to data constraints. For instance, we were unable to examine the separation between control and cash-flow rights as well as the influence of manager characteristics on pollution levels. Future research should address these limitations and expand the analysis to other emerging market countries to further investigate the impact of lax or ineffective environmental regulations on pollution outcomes.Practical implicationsThe research findings have practical implications for investors and policymakers. Investors interested in environmentally sustainable investments should consider the higher pollution levels associated with business group-affiliated firms. Policymakers can use these findings to design more effective regulations and incentives to encourage emission reduction efforts within business group structures.Social implicationsThe study’s results emphasize the need for a comprehensive understanding of the environmental implications of business group affiliation. By recognizing the potential for higher emissions in business group structures, stakeholders can advocate for sustainable practices, encourage transparency and promote responsible environmental management within corporate entities.Originality/valueThis study contributes to the literature on corporate governance, climate risks and pollution externalities by providing an empirical evidence on the relationship between business group affiliation and CO2 emissions. It highlights the importance of considering the influence of corporate structures on environmental performance, particularly in the context of emerging market economies.