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Does corporate governance matter? The case of environmental and social responsibility committees in the board
Kevin Lam, Chinese University of Hong Kong
Yue Li, University of Toronto
ABSTRACT. This study examines whether having an environmental committee in the board leads to improvement in firms’ environmental performance over time. Using a sample of S&P 1500 firms with significant toxic releases during the period of 1993 to 2002, we document a complex relationship between corporate governance mechanisms and improvement in corporate environmental performance. We find that having an environmental committee in the board is associated with significant reduction of toxic emission over the sample period for firms with high pollution propensity. For firms with low pollution propensity, having an environmental committee on the board has no significant impact on their emission reduction. These results are robust to controls for industry groups and firm-specific financial characteristics. The findings indicate that the motivation for establishing an environmental committee and its effectiveness with respect to pollution reduction may differ by industry pollution propensity.
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