Modeling board governance,environmental expertise,and social engagement effects on firm environmental performance: Panel data evidence |
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| Affiliation: | 1. Rotman School of Management, University of Toronto, Toronto, ON, Canada;2. Institute for Management & Innovation, University of Toronto Mississauga, Mississauga, ON, Canada;3. Smith School of Business, Queen’s University, Kingston, ON, Canada;4. SUSTech Business School, Southern University of Science and Technology, Shenzhen, China;1. Department of Business Administration, National Chung Cheng University, Taiwan;2. Department of Economics, National Chengchi University, Taiwan;1. University of Tennessee-Knoxville, United States;2. University Duisburg-Essen, Germany;3. Florida State University, United States;1. Business School, Sichuan University, Chengdu, China;2. Faculty of Business Administration, University of Macau, Taipa, Macau;3. Research Center of Finance, Shanghai Business School, Shanghai, China;1. Department of Accounting and Corporate Governance, Macquarie University, North Ryde, NSW 2109, Australia;2. Faculty of Business Administration, Memorial University of Newfoundland, St. John’s, NL A1B 3X5, Canada;3. John Molson School of Business, Concordia University, 1455 Boulevard de Maisonneuve O Montréal, QC H3G 1M8, Canada;1. Graduate School of Science in Taxation, University of Seoul, 163 Seoulsiripdaero, Dongdaemun-gu, Seoul 02504, Republic of Korea;2. School of Business Administration, Chonnam National University, 77, Yongbong-ro, Buk-gu, Gwangju 61186, Republic of Korea |
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| Abstract: | Prior research establishes that board governance quality measures positively impact firm environmental performance. In this study, we propose an empirical model using structural equation modeling (SEM) to explore additional enhancements to board governance, namely board environmental expertise (BEE) and board social engagement (BSE) and show that they incrementally improve firm environmental performance (EN). Our proposed latent construct measure, BEE, goes beyond traditionally dichotomous measures used in the literature. BEE has a total effect on firm environmental performance that is over two thirds the size of effects arising from traditional governance quality measures (GOV). The second enhancement of our model is the focus on BSE, a novel construct to the CSR literature. In addition to possessing environmental knowledge enabling expertise, we demonstrate that a board with a deeper commitment to society will further improve firm environmental performance. Using SEM, we find that the indirect effects of GOV, BEE, and BSE on EN represent a substantial portion of the total effects on EN. Hence, ignoring these indirect effects would result in substantial understatement of the effects of improvements to governance on environmental performance. |
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| Keywords: | Board environmental expertise Board social engagement Firm environmental Performance Structural equation modeling |
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