Double standards? The adverse impact of chairperson hometown ties on corporate green innovation

• Published in: Journal of corporate finance (Amsterdam, Netherlands) Netherlands), 2024-10, Vol.88, p.102640, Article 102640
• Main Authors: Xu, Nianhang, Li, Min, Xie, Rongrong, Chan, Kam C.
• Format: Article
• Language: English
• Subjects: Double standards; Environment protection; Green innovation; Hometown chairperson; Social capital
• ISSN: 0929-1199
• DOI: 10.1016/j.jcorpfin.2024.102640

Using a sample of Chinese firms from 2000 to 2018, we document that hometown firms (firms with hometown chairpersons) engage in less green innovation than non-hometown firms. Evidence suggests that local stakeholders offer hometown chairpersons more protection from environmental consequences than non-hometown chairpersons. We identify two possible mechanisms: government patronage and accommodation by local supply chain partners. Furthermore, we find that the double standards are alleviated with insignificant difference in corporate green innovation when non-hometown chairpersons marry hometown spouses or build local political relationships. Additional analyses suggest that (1) the double standards drive hometown firms to emit more pollutants than non-hometown firms, (2) when a firm is under government scrutiny for environmental issues, located in the city with severe air pollution, or in heavily polluting industries, the adverse effect of a chairperson's hometown on green innovation is minimal, and (3) our findings on green innovation also extend to a decrease in the number of pollutant treatment facilities and treatment capacity in a firm.