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Top-management compensation and environmental innovation strategy

Phung, Giang; Trinh, Hai; Nguyen, Tam; Trinh, Vu

Authors

Giang Phung

Hai Trinh

Tam Nguyen

Vu Trinh



Abstract

The increasing awareness of global climate change puts more pressure on firms to reduce their environmental externalities. Managers long ignored this responsibility as it may erode business profits, going against their traditional goals. In this study, we examine the effect of extrinsic incentives (i.e., reward-driven motivation) for top management on corporate environmental innovation strategy (i.e., eco-innovation), using a large dataset of S&P1500 non-financial firms for 2000-2020. The results indicate that firms with greater levels of top-management compensation exhibit higher scores of eco-innovation engagement. The effect holds after we address the endogeneity problem through the quasi-natural experiment using the difference-indifferences analysis on the event of the Paris Agreement 2015. Our further investigations reveal that such a positive impact of managerial incentives on eco-innovation is less intensified in the more polluting industries but more pronounced in more innovative ones.

Journal Article Type Article
Acceptance Date Jul 2, 2022
Online Publication Date Jul 12, 2022
Publication Date Jul 12, 2022
Deposit Date Oct 31, 2022
Publicly Available Date Nov 2, 2022
Print ISSN 0964-4733
Peer Reviewed Peer Reviewed
DOI https://doi.org/10.1002/bse.3209
Keywords environmental policy; eco-innovation; top-management compensation JEL classification: C23; G01; G30; L50; M41 2
Public URL https://nottingham-repository.worktribe.com/output/13168701
Publisher URL https://onlinelibrary.wiley.com/doi/10.1002/bse.3209

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