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Director Expertise and Corporate Sustainability

Author

Listed:
  • Peter Iliev
  • Lukas Roth

Abstract

We show that US firms increase their sustainability performance when their directors acquire expertise through their exposure to sustainability reforms in foreign countries where they serve as directors. Our results suggest that a board that gains sustainability expertise increases a firm’s overall sustainability performance by 7.1%. The increase in sustainability comes both from improvements in environmental and social practices. Directors also consider the tradeoffs between sustainability improvements and firm characteristics, with boards having a stronger impact on sustainability in firms from clean industries and firms that face fewer operational and financial constraints.

Suggested Citation

  • Peter Iliev & Lukas Roth, 2023. "Director Expertise and Corporate Sustainability," Review of Finance, European Finance Association, vol. 27(6), pages 2085-2123.
    • Handle: RePEc:oup:revfin:v:27:y:2023:i:6:p:2085-2123.
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    File URL: http://hdl.handle.net/10.1093/rof/rfad012
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    More about this item

    Keywords

    Sustainability; Environmental; Social; E&S; Directors; Boards; Regulation;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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