Does CEO Risk-Aversion Affect Carbon Emission?

Ashrafee Hossain, Samir Saadi, Abu S. Amin

Research output: Contribution to journalArticlepeer-review

1 Scopus citations

Abstract

Does CEO tolerance to risk affect a firm’s long-run sustainability? Using CEO insider debt holding, we show that CEO’s risk-aversion encourages immoral yet rational decisions of emitting more greenhouse gas thereby adversely affecting the firm’s long-run sustainability. Our result is robust to several endogeneity tests including a quasi-natural experiment. Our finding also suggest that to mitigate potential adverse reactions from stakeholders, carbon emitting firms with risk-averse CEOs tend to spend more on CSR activities. Much of the heterogeneity in our results are attributed to companies with weaker governance, powerful CEOs, and operating in a competitive product market. Overall, contrary to conventional wisdom, CEO preference toward risk-aversion can often lead to unethical outcomes (environmental degradation) and especially appears to be a key determinant for firm-level carbon emissions.

Original languageEnglish
JournalJournal of Business Ethics
DOIs
StateAccepted/In press - 2022

Keywords

  • CEO inside debt
  • CSR
  • Carbon risk
  • Executive compensation
  • GHG emission

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