TY - JOUR
T1 - Carbon performance, financial performance and market value: The moderating effect of pay incentives
AU - Adu, Douglas A.
AU - Flynn, Antoinette
AU - Grey, Colette
N1 - Publisher Copyright:
© 2022 The Authors. Business Strategy and The Environment published by ERP Environment and John Wiley & Sons Ltd.
PY - 2023/5
Y1 - 2023/5
N2 - We investigate the interrelationships among carbon performance, CEO Pay, executive compensation, financial performance and market value. Using data relating to non-financial firms from UK FTSE 350 from 2009 to 2018, our findings are fourfold. First, our results suggest that actual carbon performance is negatively associated with financial performance and market value of firms. Second, we document that self-reported carbon performance has no effect on financial performance. By contrast, we observe that self-reported carbon reduction initiatives performance has positive impact on market value. Third, our results suggest that CEO Pay, and executive compensation have positive moderating effect on the association between self-reported carbon performance and financial performance. In addition, we show that self-reported carbon performance–market value nexus is positively moderated by CEO Pay and executive compensation. Fourth, we observe that CEO Pay, and executive compensation have no moderating impact on actual carbon performance–market value nexus. Our findings demonstrate that while firms appear to employ compensation incentives to symbolically enhance their self-reported carbon performance, this does not result in actual carbon emission reduction. Our findings have key implications for policymakers.
AB - We investigate the interrelationships among carbon performance, CEO Pay, executive compensation, financial performance and market value. Using data relating to non-financial firms from UK FTSE 350 from 2009 to 2018, our findings are fourfold. First, our results suggest that actual carbon performance is negatively associated with financial performance and market value of firms. Second, we document that self-reported carbon performance has no effect on financial performance. By contrast, we observe that self-reported carbon reduction initiatives performance has positive impact on market value. Third, our results suggest that CEO Pay, and executive compensation have positive moderating effect on the association between self-reported carbon performance and financial performance. In addition, we show that self-reported carbon performance–market value nexus is positively moderated by CEO Pay and executive compensation. Fourth, we observe that CEO Pay, and executive compensation have no moderating impact on actual carbon performance–market value nexus. Our findings demonstrate that while firms appear to employ compensation incentives to symbolically enhance their self-reported carbon performance, this does not result in actual carbon emission reduction. Our findings have key implications for policymakers.
KW - CEO Pay
KW - carbon performance
KW - environmental policy
KW - executive compensation
KW - market value
KW - self-reported carbon performance
UR - http://www.scopus.com/inward/record.url?scp=85135966107&partnerID=8YFLogxK
U2 - 10.1002/bse.3239
DO - 10.1002/bse.3239
M3 - Article
AN - SCOPUS:85135966107
SN - 0964-4733
VL - 32
SP - 2111
EP - 2135
JO - Business Strategy and the Environment
JF - Business Strategy and the Environment
IS - 4
ER -