How do CEO’s green characteristics affect ESG performance?

ABSTRACT

How do the characteristics of senior executives affect firm’s ESG performance? Utilizing the data of the A-share listed firms in China spanning 2009 to 2021, this study examines the effect of CEO’s green characteristics on ESG performance based on the Upper Echelon Theory. The results show a positive relationship between firm’s ESG score and CEO’s green educational or work experience. Mechanism analysis shows that CEO’s green educational background enhances corporate environmental awareness; CEO’s green work experience helps the firm to avoid environmental administrative punishment and improve corporate innovation, which will benefit corporate sustainability. This paper helps to understand the relationship among the CEO’s green characteristics, the motivation for sustainability, and the ability to improve the firm’s ESG.

KEYWORDS:

• ESG performance
• CEO characteristics
• green experience
• upper echelon theory

JEL CLASSIFICATION:

• M14
• G30

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ The SNSI ESG score data are from Wind database, and the rationality of using SNSI ESG rating data is shown in Appendix A.

² The variable $\mathit{GEB}$ equals 1 if the CEO has a green educational background, and 0 otherwise; the variable $\mathit{GWE}$ equals 1 if the CEO has green work experience, and 0 otherwise.

³ Managers include the directors, supervisors and executives.

⁴ Baron and Kenny (1986) put forward an analytical framework (Causal Steps Approach) to conduct mechanism analysis. However, the method is widely questioned by researchers because of the endogeneity problem caused by missing variables or other problems (Bullock, Green, and Ha 2010). Hence we only explore the relationship between core explanatory variables and mediator variables, consistent with Dell (2010), Huang and Wei (2023).:

⁵ If the CEO also serves as the director of the firm.

⁶ If the CEO is employed by several organizations or has a senior title, he is considered to have a high personal reputation.

⁷ If the CEO has a master’s degree or above, the CEO is defined as high education.

⁸ The environmental regulation pressure is measured by the frequency of environment-related keywords (see Appendix C) in the city’s Government Work Report. The cities are divided into high environmental regulation pressure and low environmental regulation pressure by dichotomy.

⁹ Consistent with Huang and Wei (2023), 15 industries are defined as heavy pollution industries. The heavy pollution industry’s codes are: B06, B07, B08, B09, C17, C19, C22, C25, C26, C28, C29, C30, C31, C32, D44. (constructed by China Securities Regulatory Commission)

¹⁰ Shanghai, Zhejiang, Jiangsu, and Guangdong are defined as high-marketization degree regions. We refer to the Marketization index of China’s provinces in 2019 (X. L. Wang, Hu, and Fan 2021). These four provinces are the top four provinces in terms of marketization index, and about half of the Chinese listed firms are located in these four provinces.

Additional information

Funding

This work was supported by the Chongqing Normal University Foundation Project under Grant [number 23XWB036].