Abstract:
In this study, I try to examine the effect of environmental sustainability on CEO risk taking. Prior research, however, has struggled to establish this relation empirically; moreover, some evidence points to the possibility that the CEO risk appetite is lower for firms with sustainable environment. The opportunistic approach of managers leads to decisions about personal interests and imposing costs on shareholders by decreasing risk taking. In order to investigate the issue, data on companies listed in Tehran Stock Exchange for the period 2008-2018 were extracted and a panel regression model was used to test the research hypotheses. Consistent with expected relation between CEO risk taking and the environmental sustainability, It decreases with respect to CEO opportunistic approach. Managers may benefit from increased fluctuations in risk orientation, but are more sensitive than shareholders and have less restrictive choice that avoids higher risk.
Machine summary:
Theoretical Frameworks The expected returns of shareholders are based on the risk and the resources invested by them in the company, and the firm's sustainability approach reflects uncertainty about the economic results of management activities.
In other words, sustainability reporting can reflect the behavior of managers to reduce agency costs and control risk, which impacts the firm's ability to access financial resources as well as foreign investment.
Rajgopal and Shevlin [22] found that higher risk-taking motivation in the context of sustainability strategies encouraged managers to accept greater financial and operational risk (for example, more R&D investment, more limited investment in fixed assets, and leverage).
The current study examined the reflection of the CEO risk taking based on environmental sustainability.
Table 1: Sample distribution based on industry (View the image of this page) In this study, the extent of corporate sustainability reporting (CSR) (environmental, social, and economic disclosure) was considered as the dependent variable.
It summarizes the descriptive statistics for the environmental sustainability and CEO risk taking and other control variables used in multivariate regression analyses.
It can be seen that the environmental sustainability of firms changed to the decrease in CEO risk taking.
In other words, presents the test of the effect of environmental sustainability on CEO risk taking in different years.
The results indicate that firms which active in sustainable environments (CSR) have higher CEO risk taking (coefficient (t, t-1, 2, 3) = 0.
The hypothesis of the study is that environmental sustainability has a significant effect on CEO risk taking.