nach oben

Journal of Business Ethics

Erschienen in:

23.04.2015

Corporate Environmental Responsibility: A Legal Origins Perspective

verfasst von: Hakkon Kim, Kwangwoo Park, Doojin Ryu

Erschienen in: Journal of Business Ethics | Ausgabe 3/2017

Einloggen

Aktivieren Sie unsere intelligente Suche, um passende Fachinhalte oder Patente zu finden.

search-config

KI-gestützte Suche

Aus

Abstract

In this study, we examine the determinants of corporate environmental responsibility (CER), as well as the relationship between legal systems and CER as measured by a unique set of global environmental cost data. Results of our analyses show that firms’ legal origins affect CER, which requires a long-term management perspective. Specifically, our results indicate that civil law firms exhibit significantly higher levels of CER than common law firms. In addition, results of an auxiliary test suggest that manager shareholding has a significant, nonlinear relationship with CER. The association between a firm’s legal origin and its CER performance remains robust after controlling for the effects of managerial ownership and issues related to endogeneity. Our findings imply that although the majority of corporate law studies in the past few decades provide support for the common law system emphasizing the maximization of shareholder value and investor protection, the civil law system stressing the maximization of stakeholder wealth and the importance of CER may become more influential in the coming decades as CER becomes central to firms’ operations.

Vorheriger Artikel The Circular Economy: An Interdisciplinary Exploration of the Concept and Application in a Global Context

Nächster Artikel Managing Biodiversity Through Stakeholder Involvement: Why, Who, and for What Initiatives?

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

über 102.000 Bücher
über 537 Zeitschriften

aus folgenden Fachgebieten:

Automobil + Motoren
Bauwesen + Immobilien
Business IT + Informatik
Elektrotechnik + Elektronik
Energie + Nachhaltigkeit
Finance + Banking
Management + Führung
Marketing + Vertrieb
Maschinenbau + Werkstoffe
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

über 67.000 Bücher
über 340 Zeitschriften

aus folgenden Fachgebieten:

Bauwesen + Immobilien
Business IT + Informatik
Finance + Banking
Management + Führung
Marketing + Vertrieb
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Nur mit Berechtigung zugänglich

A real-world example of CER is summarized in General Electric’s (GE) Sustainability Commitments Report. GE’s CER programs include dredging the Hudson River and removing sediment, engaging in water-related Kaizen-Blitz activities to reduce water consumption, optimizing energy use, reducing greenhouse gas emissions, and reducing air pollution excesses and reportable spills. GE’s CER activities also include programs that educate employees, local communities, and NGO members about the environment, health, and safety.

Although several studies seek to determine the factors that affect CER activities, they investigate topics that are too narrow and specific to support an overall conclusion. For example, Eckberg and Blocker (1996) argue that conservative religious beliefs are negatively related to environmental concern. Using survey data from 17 interviews with professional sports teams and league executives, Babiak and Trendafilova (2011) suggest that strategic motives and institutional pressures are the main drivers of the adoption of green management practices. In contrast to this study, our study identifies more fundamental determinants of CER activities using global environmental costs data.

A pyramidal ownership structure embodies a top-down chain of control in which firm owners are located at the top of the pyramid. In a multiple-share class structure, investors are classified into groups according to their voting practices. These structures allow managers to reinforce their control through shareholdings with superior voting rights (DeAngelo and DeAngelo 1985).

Although some “dedicated” investors (e.g., large investors) often discourage myopic management decisions (Bushee 1998), minority shareholders and outside investors are typically more interested in short-term profits than the long-term performance or sustainability of the companies in which they invest. This short-term focus often induces management to make myopic decisions that discourage long-term investments (Porter 1992, Solomon and Solomon 1999, Talbot 2013). In turn, the lack of critical information for making long-term management decisions can harm firm value (Bainbridge 2006). Relative to civil law countries, the rights of outside investors and minority shareholders are better protected, and shareholders’ decisions are often given greater emphasis, than in common law countries (La Porta et al. 1998, 2008).

La Porta et al. (1998) claim that when investor rights are well-protected, small investors may purchase corporate shares at sufficiently high prices to induce corporations to issue new shares and open the stocks to the public. High demand for corporate shares by shareholders can accelerate the decentralization of firms’ ownership.

Sharfman and Fernando (2008) and El Ghoul et al. (2011) argue that firms can reduce the risks and costs of capital through long-run environmental management. Hart and Ahuja (1996) and Makni et al. (2009) further show that CER investment is necessary to improve a firm’s long-term performance and value, and establish a basis for sustainable growth.

Modigliani and Miller (1958) and Hart (1995) further argue that the shares typically give (minority) shareholders the right to change directors and managers that impinge on investors’ rights and force higher dividend payments that reduce investment in long-run projects.

Firms that engage in CER activities achieve the long-term goal of reputation building, which can positively affect both consumer purchases and investments in the company (Mohr et al. 2001). CER can also reduce the risks that firms face. Boutin-Dufresne and Savaria (2004) and Lee and Faff (2009) argue that low CSR/CER firms exhibit significantly higher idiosyncratic risk than do high CSR/CER firms. In addition, Albuquerque et al. (2013) find that low CSR/CER firms are subject to higher systematic risk than their high CSR/CER counterparts. Finally, CER activities can lower regulatory risk and reduce the cost of capital (Heinkel et al. 2001; El Ghoul et al. 2011).

The foundational and descriptive research in the law and finance literature (e.g., La Porta et al., 1998) describes and analyzes the legal systems in which firms operate. Specifically, this research explores the legal protection of investor rights, the quality of law enforcement, and the relationship between ownership concentration and investor protection. Although we explore the significant differences of business environments, management philosophies, corporate governance structures, and investor protections in common law and civil law countries and use these to interpret the possible link between firms’ legal origins and their CER investments, some sub-dimensions of each legal system are not distinctly differentiated between civil and common law countries (see “Discussion”). Thus, we only focus on the clearly distinct and different attributes of legal systems for motivating the Hypothesis 1.

Our untabulated results show a significantly negative relationship between our ratios of direct environmental costs to total assets and the environmental management scores from ASSET4 (Thomson Reuters). Our results indicate that environmental management scores are likely to be higher when firms have a lower ratio of environmental costs to total assets. Thus, the evidence suggests that our environmental cost data can be used as a proxy for CER level.

The input/output model developed by Leontief (1970) uses information on the amount of resources required to produce a unit of output and where this output is sold. Trucost compiles a standard model by integrating the use and emissions of over 700 environmental resources.

An online appendix with detailed descriptions for each component of direct environmental costs is available online at the Trucost web site (www.trucost.com).

Our legal origin relationship with DEC/TA remains intact when we use robust standard errors clustered at the firm level.

Although the Scandinavian civil law dummy and DEC/TA have an insignificant relationship in model 5 of Table 8 (with a t-value of -1.00), they have a statistically significant and negative relationship in all other main and robustness tests.

The legal origin (i.e., common law, civil law, French civil law, German civil law, and Scandinavian civil law) dummies are exogenously determined. Thus, we do not need to use the two-step GMM estimation in Tables 6, 7, 8, and 9. However, Table 10 uses a two-step GMM because manager ownership might be endogenously determined.

MAN_OWN and MAN_OWN_SQ are used as instrumental variables for the third and fourth lagged periods in the two-step GMM.

We also find the same results when using year- and firm-fixed effects with robust standard errors clustered at the firm level. In addition, we find that the results are qualitatively identical in all tests after mitigating possible endogeneity problems in our untabulated GMM results.

Table 11 supports the interpretation that managers of civil law firms have a greater tendency to make long-term investment decisions (i.e., CER investments) in order to enhance firm value and foster sustainable growth.

The American oil company, Chevron, was fined $9.5 billion for its pollution of the Lago Agrio oilfield in the Amazon region.

Albuquerque, R., Durnev, A., & Koskinen, Y. (2013). Corporate social responsibility and firm risk: Theory and empirical evidence. Centre for Economic Policy Research Discussion Paper, 1–68.

Almeida, H. V., & Wolfenzon, D. (2006). A theory of pyramidal ownership and family business groups. Journal of Finance, 61, 2637–2680.CrossRef

Babiak, K., & Trendafilova, S. (2011). CSR and environmental responsibility: Motives and pressures to adopt green management practices. Corporate Social Responsibility and Environmental Management, 18, 11–24.CrossRef

Bainbridge, S. M. (2006). Director primacy and shareholder disempowerment. Harvard Law Review, 119(6), 1735–1758.

Barker, V. L, I. I. I., & Mueller, G. C. (2002). CEO characteristics and firm R&D spending. Management Science, 48, 782–801.CrossRef

Barnea, A., & Rubin, A. (2010). Corporate social responsibility as a conflict between shareholders. Journal of Business Ethics, 97, 71–86.CrossRef

Baron, D. P. (2009). A positive theory of moral management, social pressure, and corporate social performance. Journal of Economics and Management Strategy, 18, 7–43.CrossRef

Berrone, P., Cruz, C., Gomez-Mejia, L. R., & Larraza-Kintana, M. (2010). Socioemotional wealth and corporate responses to institutional pressures: Do family-controlled firms pollute less? Administrative Science Quarterly, 55, 82–113.CrossRef

Beurden, P. V., & Gossling, T. (2008). The worth of values–a literature review on the relation between corporate social and financial performance. Journal of Business Ethics, 82, 407–424.CrossRef

Boubakri, N., Cosset, J. C., & Guedhami, O. (2005). Postprivatization corporate governance: The role of ownership structure and investor protection. Journal of Financial Economics, 76, 369–399.CrossRef

Boutin-Dufresne, F., & Savaria, P. (2004). Corporate social responsibility and financial risk. Journal of Investing, 13, 57–66.CrossRef

Brammer, S., Brooks, C., & Pavelin, S. (2006). Corporate social performance and stock returns: UK evidence from disaggregate measures. Financial Management, 35, 97–116.CrossRef

Bushee, B. J. (1998). Investors on myopic R&D. Accounting Review, 73, 305–333.

Castaldo, S., Perrini, F., Misani, N., & Tencati, A. (2009). The missing link between corporate social responsibility and consumer trust: The case of fair trade products. Journal of Business Ethics, 84, 1–15.CrossRef

Chan, K., Covrig, V., & Ng, L. (2005). What determines the domestic bias and foreign bias? Evidence from mutual fund equity allocations worldwide. Journal of Finance, 60(3), 1495–1534.CrossRef

Cheffins, B. R. (2002). Corporate law and ownership structure: A Darwinian link. UNSWLJ, 25, 346–389.

Chih, H. L., Shen, C. H., & Kang, F. C. (2008). Corporate social responsibility, investor protection, and earnings management: Some international evidence. Journal of Business Ethics, 79, 179–198.CrossRef

Coffee, J. C. (1999). The future as history: The Prospects for global convergence in corporate governance and its implications. Northwestern University Law Review, 93, 641–708.

David, P., Bloom, M., & Hillman, A. J. (2007). Investor activism, managerial responsiveness, and corporate social performance. Strategic Management Journal, 28, 91–100.CrossRef

Dawkins, C., & Fraas, J. W. (2011). Coming clean: The impact of environmental performance and visibility on corporate climate change disclosure. Journal of Business Ethics, 100, 303–322.CrossRef

DeAngelo, H., & DeAngelo, L. (1985). Managerial ownership of voting rights: A study of public corporations with dual classes of common stock. Journal of Financial Economics, 14, 33–69.CrossRef

Deng, X., Kang, J. K., & Low, B. S. (2013). Corporate social responsibility and stakeholder value maximization: Evidence from mergers. Journal of Financial Economics, 110, 87–109.CrossRef

Derwall, J., Guenster, N., Bauer, R., & Koedijk, K. (2005). The eco-efficiency premium puzzle. Financial Analysts Journal, 61, 51–63.CrossRef

Di Giuli, A., & Kostovetsky, L. (2014). Are red or blue companies more likely to go green? Politics and corporate social responsibility. Journal of Financial Economics, 111, 158–180.CrossRef

Eckberg, D. L., & Blocker, T. J. (1996). Christianity, environmentalism, and the theoretical problem of fundamentalism. Journal for the Scientific Study of Religion, 35, 343–355.CrossRef

El Ghoul, S., Guedhami, O., Kwok, C. C., & Mishra, D. R. (2011). Does corporate social responsibility affect the cost of capital? Journal of Banking & Finance, 35, 2388–2406.CrossRef

Fama, E. F., & Jensen, M. C. (1983). Separation of ownership and control. Journal of Law and Economics, 26, 301–325.CrossRef

Gray, W. B., & Shadbegian, R. J. (1993). Environmental regulation and manufacturing productivity at the plant level (No. w4321). National Bureau of Economic Research.

Guenster, N., Bauer, R., Derwall, J., & Koedijk, K. (2011). The economic value of corporate eco-efficiency. European Financial Management, 17, 679–704.CrossRef

Hail, L., & Leuz, C. (2006). International differences in the cost of equity capital: Do legal institutions and securities regulation matter? Journal of Accounting Research, 44, 485–531.CrossRef

Hansmann, H., & Kraakman, R. (2000). End of History for Corporate Law. Georgetown Law Journal, 89, 439–468.

Hart, O. (1995). Corporate governance: Some theory and implications. Economic Journal, 105, 678–689.CrossRef

Hart, S. L., & Ahuja, G. (1996). Does it pay to be green? An empirical examination of the relationship between emission reduction and firm performance. Business Strategy and Environment, 5, 30–37.CrossRef

Heinkel, R., Kraus, A., & Zechner, J. (2001). The effect of green investment on corporate behavior. Journal of Financial and Quantitative Analysis, 36, 431–449.CrossRef

Hong, H., & Kacperczyk, M. (2009). The price of sin: The effects of social norms on markets. Journal of Financial Economics, 93, 15–36.CrossRef

Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3, 305–360.CrossRef

Jensen, M. C., & Murphy, K. J. (1990). Performance pay and top-management incentives. Journal of Political Economy, 98, 225–264.CrossRef

Jo, H., Kim, H., & Park, K. (2015). Corporate environmental responsibility and firm performance in the financial services sector. Journal of Business Ethics (in press).

Karmel, R. S. (1991). Is it time for a federal corporation law? Brooklyn Law School, 57, 55.

Karnani, A. (2012). Corporate social responsibility does not avert the tragedy of the commons-case study: Coca-Cola India. Ross School of Business Paper.

Kim, Y., & Statman, M. (2012). Do corporations invest enough in environmental responsibility? Journal of Business Ethics, 105, 115–129.CrossRef

Kitzmueller, M., & Shimshack, J. (2012). Economic perspectives on corporate social responsibility. Journal of Economic Literature, 50(1), 51–84.CrossRef

Klapper, L. F., & Love, I. (2004). Corporate governance, investor protection, and performance in emerging markets. Journal of Corporate Finance, 10, 703–728.CrossRef

Konar, S., & Cohen, M. A. (2001). Does the market value environmental performance? Review of Economics and Statistics, 83, 281–289.CrossRef

La Porta, R., Lopez-de-Silanes, F., & Shleifer, A. (2008). Economic consequences of legal origins. Journal of Economic Literature, 46, 285–332.CrossRef

La Porta, R., Lopez-de-Silanes, F., Shleifer, A., & Vishny, R. (1997). Legal determinants of finance. Journal of Finance, 52, 1131–1150.CrossRef

La Porta, R., Lopez-de-Silanes, F., Shleifer, A., & Vishny, R. (1998). Law and finance. Journal of Political Economy, 106, 1113–1155.CrossRef

La Porta, R., Lopez-de-Silanes, F., Shleifer, A., & Vishny, R. (1999). The quality of government. Journal of Law Economics and Organization, 15, 222–279.CrossRef

La Porta, R., Lopez-de-Silanes, F., Shleifer, A., & Vishny, R. (2000). Investor protection and corporate governance. Journal of Financial Economics, 58, 3–27.CrossRef

La Porta, R., Lopez-de-Silanes, F., Shleifer, A., & Vishny, R. (2002). Investor protection and corporate valuation. Journal of Finance, 57, 1147–1170.CrossRef

Lee, D. D., & Faff, R. W. (2009). Corporate sustainability performance and idiosyncratic risk: A global perspective. Financial Review, 44, 213–237.CrossRef

Lee, P. M., & O’Neill, H. M. (2003). Ownership structures and R&D investments of US and Japanese firms: Agency and stewardship perspectives. Academy of Management Journal, 46, 212–225.CrossRef

Leontief, W. (1970). Environmental repercussions and the economic structure: An input-output approach. Review of Economics and Statistics, 52, 262–271.CrossRef

Luo, X., & Bhattacharya, C. B. (2006). Corporate social responsibility, customer satisfaction, and market value. Journal of Marketing, 70, 1–18.CrossRef

Mahoney, L. S., & Thorne, L. (2005). Corporate social responsibility and long-term compensation: Evidence from Canada. Journal of Business Ethics, 57, 241–253.CrossRef

Makni, R., Francoeur, C., & Bellavance, F. (2009). Causality between corporate social performance and financial performance: Evidence from Canadian firms. Journal of Business Ethics, 89, 409–422.CrossRef

Marcus, A., & Geffen, D. (1998). The dialectics of competency acquisition: Pollution prevention in electric generation. Strategic Management Journal, 19, 1145–1168.CrossRef

McConnell, J. J., & Servaes, H. (1990). Additional evidence on equity ownership and corporate value. Journal of Financial Economics, 27, 595–612.CrossRef

McConnell, J. J., & Servaes, H. (1995). Equity ownership and the two faces of debt. Journal of Financial Economics, 39, 131–157.CrossRef

Miles, M. P., & Covin, J. G. (2000). Environmental marketing: a source of reputational, competitive, and financial advantage. Journal of Business Ethics, 23, 299–311.CrossRef

Modigliani, F., & Miller, M. H. (1958). The cost of capital, corporation finance and the theory of investment. American Economic Review, 48(3), 261–297.

Mohr, L. A., Webb, D. J., & Harris, K. E. (2001). Do consumers expect companies to be socially responsible? The impact of corporate social responsibility on buying behavior. Journal of Consumer Affairs, 35, 45–72.CrossRef

Morck, R., Shleifer, A., & Vishny, R. W. (1988). Management ownership and market valuation: An empirical analysis. Journal of Financial Economics, 20, 293–315.CrossRef

Neubaum, D. O., & Zahra, S. A. (2006). Institutional ownership and corporate social performance: The moderating effects of investment horizon, activism, and coordination. Journal of Management, 32, 108–131.CrossRef

Newey, W., & West, K. (1987). A simple, positive semi-definite, heteroskedasticity and autocorrelation consistent covariance matrix. Econometrica, 55(3), 703–708.CrossRef

Perotti, E. C., & Thadden, V. (2003). Strategic transparency and informed trading: Will capital market integration force convergence of corporate governance? Journal of Financial and Quantitative Analysis, 38, 61–86.CrossRef

Pistor, K. (2006). Legal ground rules in coordinated and liberal market economies. In Klaus J. Hopt, Eddy Wymeersch, Hideki Kanda, & Harald Baum (Eds.), Corporate governance in context: Corporations, States, and Markets in Europe, Japan, and the US (pp. 249–280). Oxford and New York: Oxford University Press.

Porter, M. E. (1992). Capital choices: Changing the way America invests in industry. Journal of Applied Corporate Finance, 5(2), 4–16.CrossRef

Russo, M. V., & Fouts, P. A. (1997). A resource-based perspective on corporate environmental performance and profitability. Academy of Management Journal, 40, 534–559.CrossRef

Ryan, H. E, Jr, & Wiggins, R. A, I. I. I. (2002). The interactions between R&D investment decisions and compensation policy. Financial Management, 31, 5–29.CrossRef

Schnatterly, K. (2003). Increasing firm value through detection and prevention of white-collar crime. Strategic Management Journal, 24, 587–614.CrossRef

Sharfman, M. P., & Fernando, C. S. (2008). Environmental risk management and the cost of capital. Strategic Management Journal, 29, 569–592.CrossRef

Solomon, A., & Solomon, J. (1999). Empirical evidence of long-termism and shareholder activism in UK unit trusts. Corporate Governance: An International Review, 7(3), 288–300.CrossRef

Spamann, H. (2009). Contemporary legal transplants: legal families and the diffusion of (Corporate) law. Brigham Young University Law Review, 6, 1813–1878.

Talbot, L. (2013). Why shareholders shouldn’t vote: A Marxist-progressive critique of shareholder empowerment. Modern Law Review, 76(5), 791–816.CrossRef

Thomas, S., Repetto, R., & Dias, D. (2007). Integrated environmental and financial performance metrics for investment analysis and portfolio management. Corporate Governance: An International Review, 15, 421–426.CrossRef

Trucost Methodology Overview (2008). Measuring company environmental impacts.

Walley, N., & Whitehead, B. (1994). It’s not easy being green. Harvard Business Review, 72(3), 46–52.

Walls, J. L., Berrone, P., & Phan, P. H. (2012). Corporate governance and environmental performance: Is there really a link? Strategic Management Journal, 33, 885–913.CrossRef

Watson, A. (1974). Legal transplants: An approach to comparative law. Athens: University of Georgia Press.

Weber, O., Koellner, T., Habegger, D., & Steffensen, H. (2008). The relation between the GRI indicators and the financial performance of firms. Progress in Industrial Ecology, an International Journal, 5, 236–254.CrossRef

White, H. (1980). A heteroscedasticity-consistent covariance matrix estimator and a direct test for heteroscedasticity. Econometrica, 48, 817–838.CrossRef

Wu, J., & Tu, R. (2007). CEO stock option pay and R&D spending: A behavioral agency explanation. Journal of Business Research, 60, 482–492.CrossRef

Titel: Corporate Environmental Responsibility: A Legal Origins Perspective
verfasst von: Hakkon Kim
Kwangwoo Park
Doojin Ryu
Publikationsdatum: 23.04.2015
Verlag: Springer Netherlands
Erschienen in: Journal of Business Ethics / Ausgabe 3/2017
Print ISSN: 0167-4544
Elektronische ISSN: 1573-0697
DOI: https://doi.org/10.1007/s10551-015-2641-1

Springer Professional

Abstract

Bitte loggen Sie sich ein, um Zugang zu Ihrer Lizenz zu erhalten.

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft+Technik"

Springer Professional "Wirtschaft"

Weitere Artikel der Ausgabe 3/2017

“How does Sustainability Leadership Affect Firm Performance? The Choices Associated with Appointing a Chief Officer of Corporate Social Responsibility”

Identity Claims and Diffusion of Sustainability Report: Evidence from Korean Listed Companies, 2003–2010

Internal Drivers and Performance Consequences of Small Firm Green Business Strategy: The Moderating Role of External Forces

The Effect of Environmental Activism on the Long-run Market Value of a Company: A Case Study

The Role of Board Environmental Committees in Corporate Environmental Performance

A Path Analysis of Greenwashing in a Trust Crisis Among Chinese Energy Companies: The Role of Brand Legitimacy and Brand Loyalty