Firm‐Level Climate Change Risk and CEO Equity Incentives

Ashrafee Tanvir Hossain · Abdullah Al Masum · Samir Saadi · Ramzi Benkraiem · Nirmol Chandra Das

189 citations0/0 files storedBritish Journal of Management

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Corporate Finance and Governance Corporate Social Responsibility Reporting Climate Change Policy and Economics

Abstract

Abstract We document evidence that CEOs who lead firms that face higher climate change risk (CCR) receive higher equity‐based compensation. Our finding is consistent with the compensating wedge differential theory and survives numerous robustness and endogeneity tests. The result is more prominent for firms that are socially responsible, susceptible to higher environmental litigation and part of the non‐high‐tech industries. Furthermore, we find supportive evidence that firms offering higher equity incentives to their CEOs for managing higher CCR are usually better off in the long run via a lower cost of equity capital and higher firm valuation.

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References

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