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Master Thesis
MSc. Business Administration: Change Management
Faculty of Economics and Business
Rijksuniversiteit Groningen
By
Alexander Renno
S4231643
a.renno@student.rug.nl
Supervisor and Co-Assessor: Prof. Dr. Oehmichen
Co-Assessor: Prof. Dr. Surroca
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Abstract
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Foreword
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Introduction
The recent change in stakeholder focus towards environmentally sensitive business practices has led to a change in business focus (Harvey & Schaefer, 2001). With this new focus on the sustainable and environmental performance of a firm, authors such as Phillips and Reichart (2000) and Driscoll and Starik (2004) even argue to the extent that firms should see the environment on its own as a stakeholder, and only act in ways to please this stakeholder. Nonetheless, this change in firm focus due to increased stakeholder pressure has led firms to act more sustainably and communicate their sustainable embarkments extensively (Lindgreen & Swaen, 2010). Stakeholders, at the same time, have a hard time distinguishing between truthful environmental communication by firms and corporate wrongdoings, or greenwashing, disguised as environmentally sensitive business practices (Delmas & Burbano, 2011). In fact, Lindgreen and Swaen (2010) find that firms’ CSR communications may trigger stakeholders’ scepticism. After all, there is a multitude of examples in which firms greenwashed their environmental performance, see the Volkswagen emission scandal as one of many (Siano, Vollero, Conte & Amabile, 2016). In essence, stakeholders want firms to engage in more sustainable and environmentally friendly practices, but when firms communicate that they met the demands of stakeholders, stakeholder scepticism arises about the validity of these messages.
Signalling theory is one possible avenue that could help stakeholders make sense of incomplete and asymmetrical information given to them by managers (Bergh, Connelly, Ketchen & Shannon, 2014). While research on signalling theory mostly focuses on strategic management and decision making (Connelly, Certo, Ireland & Reutzel, 2011), if research could find specific and simple signals for stakeholders to identify a firm’s environmental performance, it would enable them to make better decisions regarding investment, regulatory and buying behaviour, and employment decisions. Furthermore, firms could make use of the same signals to distinguish themselves from competitors, proving that their environmental reports are to be trusted.
In conclusion, the goal of this study is therefore to analyse the extent to which CEOs greenwash
their firms’ environmental performance, and to identify a signal stakeholders may use to identify trustworthy CEOs. This is important to study because of the current scepticism detailed
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Theory Development
Stakeholder Management Theory
Although Follet (1941) first addressed the idea of needing to manage stakeholder relationships by firms, Foley’s (2005) definition of stakeholders encompasses best the lens this paper takes. Foley (2005) notes that stakeholders are both the entities that are affected by the activities of the firm, and those that are “capable of causing the enterprise to fail ... if their needs are not met”. This two-way dynamic is important to note because it highlights the importance for firms to meet the needs of stakeholders. Furthermore, Garvare and Johansson (2010) add that firms don’t necessarily need to identify a stakeholder for it to be an impactful one. As long as the stakeholder either provides essential means of support or has the ability to cause impactful damage, the firm needs to consider the stakeholder needs to survive (Garvare & Johansson, 2010).
Stakeholder management is all about a firm understanding and meeting the needs of the stakeholders, and since stakeholders are considering Corporate Social Responsibility (CSR) evermore, firms are also continuously valuing and evaluating their CSR performance (Accenture & UNGC, 2010). A survey conducted by Accenture and the United Nations Global Compact (UNGC) finds that up to 93 percent of Chief Executive Officers, or CEOs, consider sustainability to be an indispensable component of the ability to survive for their firms (Accenture & UNGC, 2010). Furthermore, Flammer (2013) finds that shareholders value firms behaving environmentally responsible, as firms that behave environmentally responsible experience an increased stock price, while firms that are environmentally irresponsible experience a significant decreased stock price. Also, Flammer (2013) finds that over time, the negative reaction to environmentally harmful behaviour has increased, while the positive reaction to environmentally friendly behaviour has decreased. This shows that shareholders believe environmental behaviour needs to be a standard for firms, and that failing to adjust to this stakeholder need of behaving environmentally friendly can have adverse reactions on the value of the firm, assigned by the shareholders.
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CSR, and Brammer, Millington and Rayton (2007) find that CSR not only has a positive impact on external stakeholders, but also improves the affective commitment of employees. The question surrounding CSR is at this stage is less about whether firms should engage in it, as literature and case studies agree that CSR has a net positive effect for firms (Fombrun & Shanley, 1990; Miller, Eden & Li, 2018), but rather how firms should communicate CSR initiatives.
CSR Communication and Stakeholder Scepticism
Lindgreen and Swaen (2010) argue that firms communicating about their CSR activities may trigger stakeholders’ scepticism. Schlegelmilch and Pollach (2005) discuss this dilemma further, as firms should communicate their CSR initiatives and their stance on issues, because not addressing issues may signal to the public that the company does not deem these issues important. At the same time, the authors argue that firms overselling their CSR initiatives are more likely to be sceptically analysed by stakeholders, who then become more critical, especially if CEO words do not translate into firm action (Schlegelmilch & Pollach, 2005). Nonetheless, Lindgreen and Swaen (2010) emphasize the need for stakeholder engagement, and that to achieve successful CSR implementation, CEO’s must “build bridges with their stakeholders – through formal and informal dialogues and engagement practices – in the pursuit of common goals and convince them to support the organization’s strategic course”. Building a relationship where stakeholders can trust CEO words and firm stances is therefore key to create long-lasting, trustful, and mutually beneficial relationships.
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By analysing the trustworthiness of CEO environmental reporting, this paper aims to investigate whether greenwashing is a systematic issue across firms. In line with the greenwashing theory, this paper argues that:
H1: Higher CEO environmental reporting in communication with stakeholders is indicative of a worse environmental firm performance.
Signalling Theory
Stakeholder scepticism not only arises from the previously mentioned misleading information given by firms, but it might also stem from the fact that CSR, and especially environmental factors and environmental-firm policies, are hard to understand and evaluate for individual stakeholders. Differentiating between an actual ‘green’ firm and one that, while not lying about their actions, deceptively exaggerates the value of their environmental activities, becomes increasingly difficult for stakeholders. Signalling theory is one possible avenue that could help stakeholders make sense of incomplete and asymmetrical information given to them by managers (Bergh, Connelly, Ketchen & Shannon, 2014). While research on signalling theory mostly focuses on strategic management and decision making (Connelly, Certo, Ireland & Reutzel, 2011), it describes how an agent with incomplete information can make accurate assessments of complex topics. Drover, Wood and Corbett (2018) set the lens this paper takes, by providing a complex picture of how organizational signals are perceived by stakeholders. Drover, Wood and Corbett’s (2018) model of individual attention and signal set interpretation was set up to improve the understanding of how individuals interpret multiple, incongruent signals, creating a model future research can make use of. At the same time, the authors argue that the incongruency of information becomes increasingly difficult for individuals to process (Drover, Wood & Corbett, 2018). As such, this paper attempts to find a simple, easily accessible signal stakeholders may use to make better decisions regarding investment, regulatory and buying behaviour, and employment decisions.
Corporate Governance
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dispersed ownership, this conflict of interest is resolved in management’s favour (Berle & Means, 1932). Indeed, Demsetz (1983) argued similarly, and discussed how this dispersion of ownership demanded ongoing independent supervision of management, which is supplied by the board of directors. The role of the board of directors is to control the agency problem by separating the management and the control over decisions (Fama & Jensen, 1983). Specifically, the board of directors takes the ratification and monitoring role over decisions, ensuring that managers act in the best interest of shareowners (Fama & Jensen, 1983).
Furthermore, Fama and Jensen (1983) argue that in order for the board of directors to be an effective control mechanism, it needs to have decision experts that have valuable internal information to make the right ratification and monitoring decisions. Only when the board of directors has enough internal information can it best represent the shareholders and control management. In this vein, Fama and Jensen (1983) expect the board of directors to include top-management members, to use the information provided by them, have control over the actions of top management, and properly govern over the decision-making process. These corporate governance mechanisms, with the ability for the board of directors to ratify decisions and potentially disrupt or alter management decisions, are essential for a firm to balance out the needs of stakeholders.
Beasley, Carcello, Hermanson and Lapides (2000) found that companies that committed financial fraud had very weak governance mechanisms in comparison to industry benchmarks. These companies had less independent board members, fewer audit committees and less independent audit committees, and less internal audit support. In essence, with weaker governance mechanisms, the CEOs were less likely to be monitored and controlled, and therefore enabled to engage in fraudulent activity. On the other hand, Fernandes (2008) questioned the validity of using independent board members. The author’s research found that firms with zero non-executive board members have fewer agency problems, thereby casting doubt on the validity of independent board members and their ability to monitor top management. While the need for board mechanisms to exist in order to control management decisions to protect owners is undisputed, the means to achieve the best internal corporate governance is still debated in research.
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Misangyi and Acharya (2014) state that with the substitution theory, monitoring of management may occur either via boards of directors or large outside shareholders. This becomes relevant when individual shareholders do not have the necessary control and power to monitor top management, and thereby rely on internal mechanisms, like the board of directors, to monitor top management in line with shareholder interest. Furthermore, in the complementarity theory, which Misangyi and Acharya (2014) find to be more prevalent in their analysis, the internal and external mechanisms rely on each other to strengthen each other. Again, shareholders need strong internal corporate governance mechanisms to control top management to achieve high firm profits (Misangyi & Acharya, 2014). The next question for shareholders then becomes the following: what should the board of directors constitute of to protect the owners of the firm’s interests?
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Instead, this paper argues that shareholders seek more than just financial performance (Miller, Eden & Li, 2018; Brammer, Millington & Rayton, 2007, Flammer, 2013), since, as discussed previously, shareholders seek environmentally sensitive business practices. Corporate governance mechanisms should, therefore, also seek to meet these changing stakeholder demands. Additionally, Adams, Akyol and Verwijmeren (2018) find that of all the skills exhibited on the board, the sustainability skill is the least represented on boards in firms. This paper will analyse the value of the sustainability skill on board of directors with regards to the ability to monitor the increasing demand for eco-friendly firm conduct, and its ability to reduce the amount of greenwashing by CEOs:
Hypothesis 2: Higher CEO environmental reporting in communication with stakeholders is less indicative of a worse environmental firm performance if the board of directors possess
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Data and Methodology
Sample
This study made use of data collected by the supervisor, Dr. Oehmichen, and her doctorate student, Michelle Weck. It consisted of Standard & Poor’s 500 (S&P 500) companies from the years 2011-2017. This data set was useful because it was mandatory for these publicly traded companies to share and publish their data, making the data collection simpler. At the end of the study, 1,379 observations were able to be collected with complete data on all variables, out of a possible 3,500. This included 422 firms, with a minimum of 1 year, a maximum of 7 years, and an average of 3.3 years of data per firm.
Measures
Firm Environmental Score (Dependent Variable)
As the dependent variable, to rate how environmentally friendly a firm operates, this report made use of the ASSET4® database of Data-Stream by Thomson Reuters. The ASSET4® database independently collects information and scores firms on environmental, social, corporate governance and economic factors, rating them on a scale of 0 to 100. This paper made use of the environmental rating, or ENSCORE, provided for each firm for each year. This database is well reflected and used in the research community (Tarmuji, Maelah & Tarmuji, 2016; Ribando & Bonne, 2010; Drempetic, Klein & Zwergel, 2019), and therefore the use of the database to rate firms of their environmental performance by this paper should closely resemble actual firm environmental performance.
CEO Environmental Reporting (Independent Variable)
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checked using LIWC software and no differences were found. This data collection was performed by the doctorate student, Michelle Weck.
The first step in transforming this data was to equalize the number of words used by CEO’s. I used:
(𝐶𝐸𝑂 𝐸𝑛𝑣𝑖𝑟𝑜𝑛𝑚𝑒𝑛𝑡 𝑊𝑜𝑟𝑑 𝐶𝑜𝑢𝑛𝑡 ∗ 500) 𝑇𝑜𝑡𝑎𝑙 𝑤𝑜𝑟𝑑𝑠 𝑢𝑠𝑒𝑑
This led to the number of sustainability words used by the CEO per 500 words spoken, better resembling CEO focus. Furthermore, I noticed that this data was heavily skewed to the left, i.e., low number of sustainability words used on average. Finney (1941) showed that to normalize observations one should take the logarithm of the observations. This paper therefore made use of the natural logarithm of the former equation, resulting in the final independent variable referred to as LnCSR_CEO_REAL.
Board Sustainability Skill (Moderator)
To collect the data of the board sustainability skill, similar to Adams, Akyol and Verwijmeren (2018), this paper makes use of the descriptions of director skills provided by firms after the 2009 amendment of the Regulation S-K to mandatorily provide justifications for hiring new board members, based on their skill. BoardEx was used as the database to collect the board skills data, collected and provided for analysis by Dr. Oehmichen and Weck. For the regression, this paper created a dummy variable out of the skills data, such that boards that included 1+ board member with the sustainability skill were given a score of 1, while those without a board member with the sustainability skill were given a 0. This was done to see the moderating effect it has on the relationship between CEO reporting and firm environmental score.
Industry Sector (Control Variable)
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accounting for industry-specific variables is essential to capture as much variance as possible. As Feng and Malik (2020), this paper makes use of the 2-digit SIC to create industry dummies.
Year (Control Variable)
In the same light, this analysis also made use of indicator variables for each year. Similar to Feng and Malik (2020), the analysis needs to isolate macro-economic effects from the relationship studied and does this by making year a specific indicator variable.
LnRevenue (Control Variable)
To control for firm size, this paper made use of the annual revenue of each firm. This was necessary because firm size has been found to significantly affect CSR participation (Udayasankar, 2007). This paper uses the natural logarithm of the total revenue per year as an indicator for firm size (Horowitz, Loughran & Savin, 2000).
CEO_Tenure_Board (Control Variable)
Harjoto, Laksmana and Lee (2015) find that CEO tenure increases overall CSR by reducing CSR concerns in a firm. To counteract this effect, the tenure of the CEO is considered in the analysis by taking the years each CEO spent as CEO of the firm.
Firm Performance (Control Variable)
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Regression
Since this paper made use of longitudinal data, from 2011 until 2017, and made use of sometimes the same and sometimes different subjects, namely CEOs, a panel data structure was used to test the hypotheses. Furthermore, this paper used random-effects regressions to test the hypotheses. This was done because across individuals, CEO reporting differed from year to year, and therefore a random effects regression was necessary (Gelman, 2005). In this light, the ‘xtreg’ command was used in STATA to regress all hypotheses.
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Results
Appendix 2 shows the descriptive statistics of the variables used for the analysis. Although ENSCORE, the environmental score given to firms by the ASSET4® rating, is continuous from 0-100, the average lays below 50. Furthermore, no firm managed to get the maximum possible rating, while 115 got a score of 0. For the LnCSR_CEO_REAL variable that analyses how many sustainability words the CEO used per 500 words, the average amount of words used was Ln(x)=-1.236914, or roughly 0.29 words per 500. The minimum number of sustainability related words used is 0, and the maximum is ≈ 7.35 per 500 words. For the board sustainability skill variable, since this is coded as a dummy variable, also shown by the min and max values of 0 and 1, nearly 30% of all firms include a board of director with the sustainability skill. To test for multicollinearity, a VIF (variable inflation test) was performed, with the results reported in Appendix 3. The mean VIF = 3.886, which is below the threshold of 4 (O’brien, 2007).
Next, both skewness and kurtosis tests were run to test whether the sample size was normally distributed, shown in Appendix 4. First, to elaborate on the reasoning of why the natural log of the independent variable, CEO reporting, was used, the skewness and kurtosis of CSR_ENVIRONMENT_REAL equals 0.000 for both, violating the normal distribution rule of combined needing to be higher than 0.05. After using the logarithmic function of the independent variable, LnCSR_CEO_REAL, the combined result of skewness and kurtosis = 0.141, above the threshold for normality. As such, by transforming this independent variable, the data no longer violates normal distribution rules. Appendix 5 and Appendix 6 show how the treatment elaborated before affects the normality of the independent variable clearly. Another striking result shown in Appendix 4 is that even though ENSCORE is a continuous variable, it is not normally distributed, shown by the combined skewness and kurtosis score of 0.000. The observations were skewed to the left, with 115 firms receiving the lowest possible score of 0. Of these firms, only 10%, compared to the average of nearly 30%, had a board member with the sustainability skill. Appendix 7 shows the correlations table of the variables used. As a quick note, firm size, represented by LnRevenue, was the highest correlated variable with firm environmental performance, at 0.475. All variables in Model 1 are significantly correlated, either at the p < 0.05 level or at the p < 0.01 level.
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does not significantly predict the firm environmental score, p > 0.1. Overall r-squared was 0.44, and while the coefficient of the independent variable is positive at 0.304, this model can not accurately predict how CEO environmental reporting predicts firm environmental score due to the high p-value at 0.478. Therefore, Hypothesis 1 is not supported, as the analysis fails to reject the null hypothesis.
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Discussion and Conclusion
The analysis has, therefore, failed to find a significance between what the CEO reported and what the actual firm environmental score was. Firstly, the greenwashing theory of CEOs misleading stakeholders about their environmental intentions, stating that they are positively impacting the environment while in reality doing the opposite, was not supported. The analysis would have needed to produce a negative coefficient with a significant p-value to confirm this stakeholder scepticism. However, the results also do not suggest that CEOs accurately report the firm’s actual environmental performance. While stakeholder management theory urges CEOs to build relationships with stakeholders (Lindgreen & Swaen, 2010), CEOs in this analysis have not been found to always report firm environmental performance truthfully. While the results indicate a positive relationship between CEO reporting and firm environmental performance, the high p-value suggests that one cannot in certainty say this is true for all firms.
The discussion will, therefore, focus on trying to broaden the theoretical understanding of how CEO environmental reporting can better be understood as an indicator for firm environmental performance. Clearly, some firms, if not most, have CEOs reflect accurately how well their firms perform environmentally. Firms that perform well environmentally should have CEOs boast about their accomplishments, while firms that perform poorly should refrain from discussing environmental policies and the negative impact their firms have on the environment. At the same time, the low significance suggests that some firms do not adhere to these categories, either firms that perform well environmentally but do not discuss their accomplishments, or firms that perform poorly but do heavily discuss their environmental impact. Finding the contingency that differentiates the groups of accurate reporting and inaccurate reporting is therefore key in better understanding CEO reporting as an indicator for real firm environmental performance.
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earnings calls only, it could be that a firm that properly explained and reasoned their sustainability efforts does not need to further elaborate on their sustainability initiatives and will not get questions related to sustainability. This firm then did not underreport its achievements, instead in this section of the meeting it did not get a further chance to discuss its sustainability actions. The choice of using this specific part of the meeting was clear, because it is the unscripted section which CEOs can not prepare for, but it also creates a potential bias for firms that perform well not to discuss sustainability issues because they will not be questioned about them.
In the same light, firms that performed badly, in terms of their environmental performance, but discussed sustainability issues extensively might also be firms that simply got asked a lot of questions about their mishaps, rather than firms that are trying to cunningly greenwash stakeholders. If CEOs are, rightfully, bombarded with questions about sustainability, they will discuss sustainability more than firms that are not questioned about it. At the same time, within this group of poor performing firms there might be firms that know they are performing badly and are outlying their plans to improve for the future. These firms will in this analysis be in the same category as firms trying to greenwash, but quite oppositely are explaining how they aim to improve in the future.
The reason this paper is discussing this multifaceted issue, trying to categorize firms into certain boxes, is to enable future research to continue this track of understanding motives for why CEOs report sustainability the way they do. If future research can find what contingency differentiates these different actors and their motives, it can give an answer to the question: What signal can be used for stakeholders to trust CEO reporting? This would also help firms actively looking to strengthen the relationship with stakeholders. If firms can have an answer to the question: ‘What do you do to guarantee the stakeholders that what you report is true?’, they could form better relationships with stakeholders to reduce their scepticism.
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CEOs that do not report extensively on sustainability, firms without a director on the board with the sustainability skill perform far better than firms with a director on the board with the sustainability skill. While this paper did not analyse further why this could be the case, a potential answer could come from firms using a director on the board with the sustainability skill to fend of questions about sustainability, especially firms performing poorly. As mentioned previously, very few firms in this category of low performers employed a director with the sustainability skill, with for example only 10% of firms with a firm environmental score of 0 employing one, and as such the sample size is potentially not large enough to track the real trend. Nonetheless, future research should analyse this phenomenon further to try and find the motives of firms in this category.
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Limitations and Future Research
Four major limitations seem to apply to the analysis constructed above. First, and mentioned previously, the data for the CEO reporting stems from the question and answer section of the quarterly earning calls. It was decided to use this data to ensure free thinking and unscripted answers by CEOs to best represent their real responses. However, due to the layout of the question and answer, there are multiple factors that can sway answers to be not perfectly representative of how the CEO wants to report sustainability. One would assume that a CEO with a poor environmental firm performance record will get more questions on sustainability than one that has a firm with a good environmental performance. With more questions also come more answers, and so firms that performed badly will likely also have CEOs discuss sustainability more. This would then be categorized as greenwashing in this data set, while potentially not always fitting this category. Furthermore, depending on what was previously discussed in the presentation led by the CEO, ergo the scripted part, firms that want to show how well they have performed environmentally will likely focus a big section on this area in their presentation. In the question and answer section then, the parties questioning the firm will be less likely to focus their attention and questions on sustainability. This would then, in this data set, be represented as firms that perform well but CEOs that do not report on sustainability, skewing the data. Also, different audiences will ask different questions. For example, Institutional investors will ask far more questions about profitability than regulatory stakeholders. For future research, it would be interesting to see whether different data sets, be it from the presentations at the annual shareholder meetings, or potentially the CEO letters in the annual reports, could shed more light on the relationship between CEO reporting and firm environmental performance.
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potentially more truthful representation between CEO reporting and firm environmental performance (Maignan & Ralston, 2002).
Third, this analysis does not consider a lagged effect in CEO reporting. Specifically, when CEOs promise to improve on their environmental performance, this data compares the firm environmental performance to what the CEO reported that year. However, changing to a sustainable firm takes time. For example, Nuber, Velte and Hörisch (2020) found a time-lagged effect of sustainability performance on financial performance. Further research should investigate whether the implementation of sustainable firm initiatives, led by the CEO, also has a lagged effect on firm environmental performance. Change management literature would agree that it takes time to implement change (Kegan & Lahey, 2001; Deszca, Ingols & Cawsey, 2019. Further research could therefore see how CEO reporting affects future firm environmental performance, and whether CEOs that report more on sustainability now will have better firm environmental performance later.
Next, this paper does not test for endogeneity. As such, it is unclear whether CEO reporting has an effect on the firm environmental score or whether the firm environmental score has an effect on CEO reporting. Causal relationship is, therefore, unknown and should be studied in future research. This paper also does not perform a robustness test, which could be the missing link to finding a significant moderator. For example, the previously mentioned data sample issue could be circumvented by testing the model within a different data sample, which might lead to slightly more significant results.
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Secondly, future research should analyse what contingency can differentiate between a firm that reports extensively but performs poorly, versus one that reports a lot but performs well environmentally. This could help firms reporting sustainability that are performing well to differentiate themselves better from firms that greenwash. While this paper did not manage to prove that CEOs greenwash, clearly some firms still engage in these wrongdoings. As such, if research could find out what other factors differentiate these two categories, firms could report these factors to the stakeholders to create more trusting relationships.
Theoretical and Managerial Implications
The theoretical contribution this paper has is that it challenged the significance of CEO environmental reporting. With the results presented, the hypothesis of greenwashing can not be proven among all firms. At the same time, this analysis does not find proof that firms report environmental actions always truthfully. As such, this paper expanded the knowledge on greenwashing, showing that this concept should be used more case based than as a fundamental idea for all firms. Furthermore, this paper adapted signalling theory into stakeholder management theory, and believes that this viewpoint can help further research identify new directions for research. Finally, this paper also contributed to the corporate governance literature, bringing more focus on governance mechanisms like the skills of directors on the board. While the results were nonsignificant, it should be the springboard for future research to better understand the value of corporate governance mechanisms, and which are best at ratifying and monitoring top management.
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Appendix 1:
Sustainability Wordlist
Source Wordlist
Myšková, R., & Hájek, P. (2018) Sustainability and corporate social responsibility in the text of annual reports—The case of the IT services industry. Sustainability, 10(11), 4119. https://doi.org/10.3390/ su10114119
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Appendix 2
Descriptive Statistics
Variable Obs Mean Std. Dev. Min Max
ENSCORE 1,379 45.93309 28.24718 0 98.49 LnCSR_CEO_REAL 1,379 -1.236014 .9555695 -4.402662 1.9951 BoardSustainabilitySkill 1,379 .2973169 .457243 0 1 LnRevenue 1,379 9.174421 1.165339 6.648956 13.08602 ceo_tenure_board 1,379 4.578825 4.178581 0 26.7 ROA 1,379 .2342701 .2097634 -1.142978 1.247081
Appendix 3
Multicollinearity test
Variance inflation factor
VIF 1/VIF
LnCSR CEO REAL
1.474
.679
1.BoardSustainabil~l
1.276
.783
LnRevenue
1.846
.542
ceo tenure board
1.209
.827
ROA
2.432
.411
Mean VIF
3.886
.
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Appendix 4
Skewness and Kurtosis test
Skewness/Kurtosis tests for Normality
--- joint ---
Variable Obs Pr(Skewn
31
Appendix 5
Histogram of non-Ln CEO Reporting
Appendix 6
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Appendix 7
Correlations table
Pairwise correlations Variables (1) (2) (3) (4) (5) (6) (7) (8) (1) ENSCORE 1.000 (2) LnCSR_CEO_REAL 0.113*** 1.000 (3) BoardSustainab~l 0.124*** 0.079** 1.000 (4) IndustrySector -0.183*** -0.073* -0.197*** 1.000 (5) year 0.080** 0.291*** 0.036 0.030 1.000 (6) LnRevenue 0.475*** 0.078** 0.070* -0.104*** -0.006 1.000 (7) ceo_tenure_board -0.091*** -0.072 -0.105*** 0.162*** 0.016 -0.117*** 1.000 (8) ROA 0.078** -0.232*** -0.121*** -0.111*** -0.072* 0.000 0.011 1 *** p<0.01, ** p<0.05, * p<0.1Appendix 8
Regression Models
(1) (2)VARIABLES ENSCORE ENSCORE
LnCSR_CEO_REAL 0.305 -0.085 (0.430) (0.491) BoardSustainabilitySkill --- -0.043 (1.488) BoardSustainabilitySkill#LnCSR_CEO_REAL --- 1.296 (0.826) (1.189) (1.192) LnRevenue 12.685*** 12.786*** (0.955) (0.956) ceo_tenure_board 0.184* 0.176* (0.102) (0.102) ROA -0.138 -0.135 (3.877) (3.896) Constant -53.067*** -54.125*** (17.433) (17.444) Observations 1,379 1,379 Number of firms 422 422
Standard errors in parentheses
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Appendix 9
Regression results
ENSCORE Coef. St.Err. t-value p-value [95% Conf Interval] Sig LnCSR_CEO_RE AL -.085 .491 -0.17 .863 -1.046 .877 1.BoardSustainabili tySkill -.043 1.488 -0.03 .977 -2.96 2.874 Moderator 1.296 .826 1.57 .117 -.323 2.915 LnRevenue 12.786 .956 13.37 0 10.912 14.66 *** ceo_tenure_board .176 .102 1.72 .085 -.024 .376 * ROA -.135 3.896 -0.03 .972 -7.771 7.501 Constant -54.125 17.444 -3.10 .002 -88.316 -19.935 ***
Mean dependent var 45.933 SD dependent var 28.247
Overall r-squared 0.440 Number of obs 1379.000
Chi-square 508.000 Prob > chi2 0.000
R-squared within 0.171 R-squared between 0.460
*** p<.01, ** p<.05, * p<.1
34
