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Corporate governance & the environment: bad discretion, good discretion, and environmental (...)

  • JUAN SANTALO

    ()

    (Instituto de Empresa)

  • CARL KOCK

    ()

    (Instituto de Empresa)

This paper brings two important topics of corporate environmental management and corporate governance by exploring the impact of various governance mechanisms on the level of environmental performance that is realized by firms. We hypothesize that anti-takeover amendments and provisions that restrict managers´ personal liability create a sphere of "bad" discretion that allows managers to shirk by underinvesting in potentially financially beneficial levels of environmental performance. We suggest that corporate governance structures that emphasize higher levels of performance pay and lower degrees of monitoring create a degree of "good" discretion that enhances environmental firm performance.

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File URL: http://latienda.ie.edu/working_papers_economia/WP05-24.pdf
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Paper provided by Instituto de Empresa, Area of Economic Environment in its series Working Papers Economia with number wp05-24.

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Length: 36 pages
Date of creation: Jun 2005
Date of revision:
Handle: RePEc:emp:wpaper:wp05-24
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  1. Gerald T. Garvey & Gordon Hanka, 1999. "Capital Structure and Corporate Control: The Effect of Antitakeover Statutes on Firm Leverage," Journal of Finance, American Finance Association, vol. 54(2), pages 519-546, 04.
  2. Paul A. Gompers & Joy L. Ishii & Andrew Metrick, 2002. "Corporate Governance and Equity Prices," Center for Financial Institutions Working Papers 02-32, Wharton School Center for Financial Institutions, University of Pennsylvania.
  3. Stein, Jeremy C, 1988. "Takeover Threats and Managerial Myopia," Journal of Political Economy, University of Chicago Press, vol. 96(1), pages 61-80, February.
  4. Lanoie, Paul & Laplante, Benoit & Roy, Maite, 1998. "Can capital markets create incentives for pollution control?," Ecological Economics, Elsevier, vol. 26(1), pages 31-41, July.
  5. Pugh, William N & Page, Daniel E & Jahera, John S, Jr, 1992. "Antitakeover Charter Amendments: Effects on Corporate Decisions," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 15(1), pages 57-67, Spring.
  6. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
  7. Lucian Arye Bebchuk, 2002. "The Case Against Board Veto in Corporate Takeovers," NBER Working Papers 9078, National Bureau of Economic Research, Inc.
  8. DeAngelo, Harry & Rice, Edward M., 1983. "Antitakeover charter amendments and stockholder wealth," Journal of Financial Economics, Elsevier, vol. 11(1-4), pages 329-359, April.
  9. Shleifer, Andrei & Vishny, Robert W, 1990. "Equilibrium Short Horizons of Investors and Firms," American Economic Review, American Economic Association, vol. 80(2), pages 148-53, May.
  10. Johnson, Mark S & Rao, Ramesh P, 1997. "The Impact of Antitakeover Amendments on Corporate Financial Performance," The Financial Review, Eastern Finance Association, vol. 32(4), pages 659-89, November.
  11. Borokhovich, Kenneth A & Brunarski, Kelly R & Parrino, Robert, 1997. " CEO Contracting and Antitakeover Amendments," Journal of Finance, American Finance Association, vol. 52(4), pages 1495-1517, September.
  12. Hamilton James T., 1995. "Pollution as News: Media and Stock Market Reactions to the Toxics Release Inventory Data," Journal of Environmental Economics and Management, Elsevier, vol. 28(1), pages 98-113, January.
  13. Lucian Arye Bebchuk & John C. Coates IV & Guhan Subramanian, 2002. "The Powerful Antitakeover Force of Staggered Boards: Theory, Evidence and Policy," NBER Working Papers 8974, National Bureau of Economic Research, Inc.
  14. Canice Prendergast, 2002. "The Tenuous Trade-off between Risk and Incentives," Journal of Political Economy, University of Chicago Press, vol. 110(5), pages 1071-1102, October.
  15. Shameek Konar & Mark A. Cohen, 2001. "Does The Market Value Environmental Performance?," The Review of Economics and Statistics, MIT Press, vol. 83(2), pages 281-289, May.
  16. Aragon-Correa, Juan Alberto & Matias-Reche, Fernando & Senise-Barrio, Maria Eugenia, 2004. "Managerial discretion and corporate commitment to the natural environment," Journal of Business Research, Elsevier, vol. 57(9), pages 964-975, September.
  17. Lambert, Richard A. & Larcker, David F., 1985. "Golden parachutes, executive decision-making, and shareholder wealth," Journal of Accounting and Economics, Elsevier, vol. 7(1-3), pages 179-203, April.
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