Read the working paper
INSEAD Working Paper 2014/35/EPS
We present evidence of corporate governance effects on firms’ environmental performance. Using changes in takeover legislation as exogenous variations in corporate governance quality, we show that worse-governed firms generate fewer green patents relative to all their innovations. This effect is greater for firms with a smaller share of institutional ownership, with a smaller stock of green patents, and operating in states with lower pollution abatement costs and in industries less dependent on energy inputs. Our results suggest that worsegoverned managers avoid complex projects that would entail major changes in the organization and composition of the employment.