Role of Top Management in Carbon Risk: Evidence from Founder CEOs in the USA

Abstract

Founder CEOs are important for the firm. They establish the firm and run the organization in the way that matches their vision and goal. They have a lot of decision-making power to take decisions that can influence firm’s outcome. Hence, this thesis examines the role of founder CEOs’ presence in US corporations on the carbon risk of the firm using firm level data on the release of carbon dioxide. The sample of the study is the period from 2002 to 2022. The findings of this study give us strong evidence the founder CEOs have negative and significant impact on reduction carbon emissions. The results are consistent when the study apply alternative econometric methods, address endogeneity problem using instrument variable approach, firm fixed effect and propensity score matching approach regression. The result also shows that founder CEOs effect on carbon risk is more significant and stronger for firms when founder CEOs have higher age. Moreover, the additional test show that the effect of founder CEOs on firm’s carbon risk is significant after adding new control variables such as CEO age, CEO tenure and CEO ownership. Overall, the findings of this research emphasize how important the founder CEO in respect to environmental sustainability.