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Board composition and climate strategy: the role of governance in internal carbon pricing adoption

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  • Khandelwal, Urvashi
  • Khandelwal, Chitranshu

Abstract

Using a panel dataset of 4,815 U.S. firms from 2014 to 2022, this study examines the impact of board composition on firms’ decisions to adopt Internal Carbon Pricing (ICP). Our findings reveal an inverted U-shaped relationship between board size and ICP adoption, indicating that while larger boards enhance strategic oversight, excessively large boards may hinder decision-making efficiency. Additionally, board independence and gender diversity are positively associated with ICP adoption, suggesting that independent and diverse boards play a crucial role in driving sustainability initiatives. These results remain robust across alternative specifications, including spline regression, instrumental variable (IV) estimation, and GMM.

Suggested Citation

  • Khandelwal, Urvashi & Khandelwal, Chitranshu, 2025. "Board composition and climate strategy: the role of governance in internal carbon pricing adoption," Finance Research Letters, Elsevier, vol. 85(PC).
    • Handle: RePEc:eee:finlet:v:85:y:2025:i:pc:s1544612325013972
    DOI: 10.1016/j.frl.2025.108142
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