Carbon performance, financial performance and market value: The moderating effect of pay incentives

Research output: Contribution to journalArticlepeer-review

Abstract

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.

Original languageEnglish
Pages (from-to)2111-2135
Number of pages25
JournalBusiness Strategy and the Environment
Volume32
Issue number4
DOIs
Publication statusPublished - May 2023
Externally publishedYes

Keywords

  • CEO Pay
  • carbon performance
  • environmental policy
  • executive compensation
  • market value
  • self-reported carbon performance

Fingerprint

Dive into the research topics of 'Carbon performance, financial performance and market value: The moderating effect of pay incentives'. Together they form a unique fingerprint.

Cite this