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Carbon emissions and CEO pay

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  • Abu Amin
  • Ashrafee Hossain
  • Tharindra Ranasinghe

Abstract

Our study examines the link between firms' carbon emissions and their compensation to CEOs and finds a positive association in line with the compensating wage differentials theory. We use Donald Trump's 2016 election win as an exogenous shock to identify a causal relationship. Ruling out managerial power as an alternative explanation, the relations are stronger when firms are better governed and are more likely to be aware of their carbon risk. Additionally, we present evidence that high carbon emissions increase CEOs' risk of job loss, reinforcing the presence of compensating wage differentials as the plausible explanation for the positive association.

Suggested Citation

  • Abu Amin & Ashrafee Hossain & Tharindra Ranasinghe, 2025. "Carbon emissions and CEO pay," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 65(2), pages 1128-1158, June.
    • Handle: RePEc:bla:acctfi:v:65:y:2025:i:2:p:1128-1158
    DOI: 10.1111/acfi.13358
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