IDEAS home Printed from https://ideas.repec.org/a/bla/bstrat/v34y2025i8p10256-10277.html

Leading Green: The Role of CEO Social Trust and Governance in Driving Sustainable Innovation

Author

Listed:
  • Muhammad Jameel Hussain
  • Yang Qian
  • Muhammad Usman
  • Khalil Hussain

Abstract

Drawing on imprinting theory, this study examines the impact of CEO social trust on sustainable corporate practices, that is, firm‐level green innovation. Using a unique hand‐collected dataset on CEO social trust, we found that CEO social trust is positively associated with firm‐level green innovation. Also, this study found that various external governance factors, including media coverage, high audit quality, and environmental enforcement intensity, strengthen this relationship. Furthermore, additional analysis shows that the relationship is particularly pronounced in firms where managers have higher ability, CEOs are older, and firms operate within polluting industries. Our main result is robust across alternative measures of green innovation and multiple robustness tests. This study highlights the importance of institutional contexts and psychological traits in shaping the firms' strategic sustainability decisions. This research has practical implications for policymakers, managers, and practitioners in the areas of leadership development, recruitment, and environmental policy formulation.

Suggested Citation

  • Muhammad Jameel Hussain & Yang Qian & Muhammad Usman & Khalil Hussain, 2025. "Leading Green: The Role of CEO Social Trust and Governance in Driving Sustainable Innovation," Business Strategy and the Environment, Wiley Blackwell, vol. 34(8), pages 10256-10277, December.
    • Handle: RePEc:bla:bstrat:v:34:y:2025:i:8:p:10256-10277
    DOI: 10.1002/bse.70129
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/bse.70129
    Download Restriction: no
    File URL: https://libkey.io/10.1002/bse.70129?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Julian Atanassov, 2013. "Do Hostile Takeovers Stifle Innovation? Evidence from Antitakeover Legislation and Corporate Patenting," Journal of Finance, American Finance Association, vol. 68(3), pages 1097-1131, June.
    2. repec:eme:aaaj00:09513570510609333 is not listed on IDEAS
    3. Peiró-Palomino, Jesús & Gianmoena, Lisa & Picazo-Tadeo, Andrés J. & Rios, Vicente, 2024. "Social trust and the advanced aspects of social progress. Evidence for the European regions," European Journal of Political Economy, Elsevier, vol. 83(C).
    4. Stephen Knack & Philip Keefer, 1997. "Does Social Capital Have an Economic Payoff? A Cross-Country Investigation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(4), pages 1251-1288.
    5. Hainmueller, Jens, 2012. "Entropy Balancing for Causal Effects: A Multivariate Reweighting Method to Produce Balanced Samples in Observational Studies," Political Analysis, Cambridge University Press, vol. 20(1), pages 25-46, January.
    6. Dayuan Li & Min Huang & Shenggang Ren & Xiaohong Chen & Lutao Ning, 2018. "Environmental Legitimacy, Green Innovation, and Corporate Carbon Disclosure: Evidence from CDP China 100," Journal of Business Ethics, Springer, vol. 150(4), pages 1089-1104, July.
    7. Mourad Dakhli & Dirk De Clercq, 2004. "Human capital, social capital, and innovation: a multi-country study," Entrepreneurship & Regional Development, Taylor & Francis Journals, vol. 16(2), pages 107-128, March.
    8. Ahmad Hammami & Mohammad Hendijani Zadeh, 2020. "Audit quality, media coverage, environmental, social, and governance disclosure and firm investment efficiency," International Journal of Accounting & Information Management, Emerald Group Publishing Limited, vol. 28(1), pages 45-72, January.
    9. Guo, Mengmeng & Kuai, Yicheng & Liu, Xiaoyan, 2020. "Stock market response to environmental policies: Evidence from heavily polluting firms in China," Economic Modelling, Elsevier, vol. 86(C), pages 306-316.
    10. Olivier Meier & Guillaume Schier, 2021. "CSR and Family CEO: The Moderating Role of CEO’s Age," Journal of Business Ethics, Springer, vol. 174(3), pages 595-612, December.
    11. Segerson, Kathleen & Tietenberg, Tom, 1992. "The structure of penalties in environmental enforcement: An economic analysis," Journal of Environmental Economics and Management, Elsevier, vol. 23(2), pages 179-200, September.
    12. Yahya Ali Al-Matari & Abdo Ali Homaid & Hassan Alaaraj, 2016. "The Influence of Audit Committee Effectiveness on Banks' Performance in Yemen," International Journal of Economics and Financial Issues, Econjournals, vol. 6(4), pages 1424-1428.
    13. Andrew V. Shipilov & Henrich R. Greve & Timothy J. Rowley, 2019. "Is all publicity good publicity? The impact of direct and indirect media pressure on the adoption of governance practices," Strategic Management Journal, Wiley Blackwell, vol. 40(9), pages 1368-1393, September.
    14. Florian Ederer & Gustavo Manso, 2013. "Is Pay for Performance Detrimental to Innovation?," Management Science, INFORMS, vol. 59(7), pages 1496-1513, July.
    15. Ferri, Fabrizio & Li, Nan, 2020. "Does Option-Based Compensation Affect Payout Policy? Evidence from FAS 123R," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 55(1), pages 291-329, February.
    16. Nathan Nunn & Leonard Wantchekon, 2011. "The Slave Trade and the Origins of Mistrust in Africa," American Economic Review, American Economic Association, vol. 101(7), pages 3221-3252, December.
    17. Ruxi Wang & Frank Wijen & Pursey P.M.A.R. Heugens, 2018. "Government's green grip: Multifaceted state influence on corporate environmental actions in China," Strategic Management Journal, Wiley Blackwell, vol. 39(2), pages 403-428, February.
    18. Javed, Muzhar & Wang, Fangjun & Usman, Muhammad & Ali Gull, Ammar & Uz Zaman, Qamar, 2023. "Female CEOs and green innovation," Journal of Business Research, Elsevier, vol. 157(C).
    19. Leilei Gu & Jinyu Liu & Yuchao Peng, 2022. "Locality Stereotype, CEO Trustworthiness and Stock Price Crash Risk: Evidence from China," Journal of Business Ethics, Springer, vol. 175(4), pages 773-797, February.
    20. Ester Martínez‐Ros & Rasi Kunapatarawong, 2019. "Green innovation and knowledge: The role of size," Business Strategy and the Environment, Wiley Blackwell, vol. 28(6), pages 1045-1059, September.
    21. Xiangyu Chen & Peng Wan, 2020. "Social trust and corporate social responsibility: Evidence from China," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 27(2), pages 485-500, March.
    22. Michael K. Bednar & Steven Boivie & Nicholas R. Prince, 2013. "Burr Under the Saddle: How Media Coverage Influences Strategic Change," Organization Science, INFORMS, vol. 24(3), pages 910-925, June.
    23. Amore, Mario Daniele & Bennedsen, Morten, 2016. "Corporate governance and green innovation," Journal of Environmental Economics and Management, Elsevier, vol. 75(C), pages 54-72.
    24. Li, Jiaman & Dong, Kangyin & Dong, Xiucheng, 2022. "Green energy as a new determinant of green growth in China: The role of green technological innovation," Energy Economics, Elsevier, vol. 114(C).
    25. Joonho Park & Chang Youl Ko & Hoon Jung & Yong-Seok Lee, 2016. "Managerial ability and tax avoidance: evidence from Korea," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 23(4), pages 449-477, October.
    26. Xuan Tian & Tracy Yue Wang, 2014. "Tolerance for Failure and Corporate Innovation," The Review of Financial Studies, Society for Financial Studies, vol. 27(1), pages 211-255, January.
    27. Zhongju Liao & Jincai Dong & Chen Weng & Chen Shen, 2019. "CEOs' religious beliefs and the environmental innovation of private enterprises: The moderating role of political ties," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 26(4), pages 972-980, July.
    28. Karim Mahran & Ahmed A. Elamer, 2025. "Shaping ESG commitment through organizational psychological capital: The role of CEO power," Business Strategy and the Environment, Wiley Blackwell, vol. 34(1), pages 690-707, January.
    29. Muhammad Usman & Jacinta Nwachukwu & Ernest Ezeani & Rami Ibrahim A. Salem & Bilal Bilal & Frank Obenpong Kwabi, 2023. "Audit quality and classification shifting: evidence from UK and Germany," Journal of Applied Accounting Research, Emerald Group Publishing Limited, vol. 25(3), pages 448-475, August.
    30. Bischoff, Thore Sören & Hipp, Ann & Runst, Petrik, 2023. "Firm innovation and generalized trust as a regional resource," Research Policy, Elsevier, vol. 52(8).
    31. Janet Luft Mobus, 2005. "Mandatory environmental disclosures in a legitimacy theory context," Accounting, Auditing & Accountability Journal, Emerald Group Publishing Limited, vol. 18(4), pages 492-517, August.
    32. Cheng, Lulu & Xie, En & Fang, Junyi & Mei, Nan, 2022. "Performance feedback and firms’ relative strategic emphasis: The moderating effects of board independence and media coverage," Journal of Business Research, Elsevier, vol. 139(C), pages 218-231.
    33. Gaurav Gupta, 2022. "CEO's age and investment‐cash flow sensitivity," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(6), pages 2212-2224, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kong, Dongmin & Zhao, Ying & Liu, Shasha, 2021. "Trust and innovation: Evidence from CEOs' early-life experience," Journal of Corporate Finance, Elsevier, vol. 69(C).
    2. Yu Wang & Michel Magnan & Yetaotao Qiu, 2025. "Going Green: An Analysis of Mutual Fund Investment and Green Innovation in the Context of China," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 88(12), pages 3547-3584, December.
    3. Hasan, Iftekhar & (Stan) Hoi, Chun-Keung & Wu, Qiang & Zhang, Hao, 2020. "Is social capital associated with corporate innovation? Evidence from publicly listed firms in the U.S," Journal of Corporate Finance, Elsevier, vol. 62(C).
    4. El Ghoul, Sadok & Gong, Zhaoran (Jason) & Guedhami, Omrane & Hou, Fangfang & Tong, Wilson H.S., 2023. "Social trust and firm innovation," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 84(C).
    5. Li, Yuanshun & Liu, Liang & Li, Xinyuan & Zhang, Aoran, 2025. "From social networks to sustainable solutions: Unpacking the influence of social capital on green innovation," China Economic Review, Elsevier, vol. 93(C).
    6. Md Ismail Haidar, 2025. "Does Societal Trust Reduce Greenwashing? International Evidence," Business Strategy and the Environment, Wiley Blackwell, vol. 34(3), pages 3400-3424, March.
    7. Kong, Dongmin & Zhang, Bohui & Zhang, Jian, 2022. "Higher education and corporate innovation," Journal of Corporate Finance, Elsevier, vol. 72(C).
    8. Zhao, Yujie & Yang, Yuanyuan & Hua, Min & Chan, Kam C., 2024. "Social credit scoring system and corporate pollution governance: Insights from China's Social Credit System Construction," International Review of Financial Analysis, Elsevier, vol. 96(PB).
    9. Do, Trung K., 2024. "Asset redeployability and green innovation," Journal of Financial Stability, Elsevier, vol. 72(C).
    10. Yu, Qianqian, 2025. "Do venture capital-driven top management changes enhance corporate innovation in private firms?," Journal of Banking & Finance, Elsevier, vol. 171(C).
    11. Popova, Olga & See, Sarah Grace & Nikolova, Milena & Otrachshenko, Vladimir, 2023. "The societal costs of inflation and unemployment," GLO Discussion Paper Series 1341, Global Labor Organization (GLO).
    12. Hu, Shan & Yu, Yongze & Fei, Qingyu, 2023. "Social credit and patent quality: Evidence from China," Journal of Asian Economics, Elsevier, vol. 84(C).
    13. Xiao, Zhongyi & Shum, Wai Yan & Lai, Fujun & Xiang, Cheng, 2025. "How do firms respond to divergent ESG ratings? The perspective of green innovation," Research in International Business and Finance, Elsevier, vol. 75(C).
    14. Shao, Yanmin & Xu, Kunliang & Shi, Xunpeng, 2026. "To explore or exploit for legitimacy: The effect of retail investor environmental concern on corporate green technological innovation," Technovation, Elsevier, vol. 149(C).
    15. Wu, Junfeng & Liu, Baohua & Zeng, Yongliang & Luo, Hong, 2022. "Good for the firm, good for the society? Causal evidence of the impact of equity incentives on a firm's green investment," International Review of Economics & Finance, Elsevier, vol. 77(C), pages 435-449.
    16. Chuanlin Wang & Guowan Yan & Juan Ou, 2023. "Does Digitization Promote Green Innovation? Evidence from China," IJERPH, MDPI, vol. 20(5), pages 1-27, February.
    17. Zhu, Bo & Wang, Yansen, 2024. "Does social trust affect firms' ESG performance?," International Review of Financial Analysis, Elsevier, vol. 93(C).
    18. Fayçal Ait Saadi & Sami Ben Larbi & Véronique Bon, 2025. "Sustainable governance levers and environmental innovation: Evidence from French SBF 120 companies," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 32(2), pages 2347-2361, March.
    19. Yalin Jiang & Wei Cai & Yu Wang, 2024. "Change starts within: does managerial ability matter to green innovation?," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 11(1), pages 1-14, December.
    20. Qing Wan & Xiaoke Cheng & Kam C. Chan & Shenghao Gao, 2021. "Born to innovate? The birth‐order effect of CEOs on corporate innovation," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 48(9-10), pages 1846-1888, October.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:bstrat:v:34:y:2025:i:8:p:10256-10277. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://onlinelibrary.wiley.com/journal/10.1002/(ISSN)1099-0836 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.