Related party transactions and corporate environmental responsibility

Wonseok Choi; Chune Young Chung; Monika K. Rabarison; Kainan Wang

doi:10.1016/j.frl.2021.102490

Related party transactions and corporate environmental responsibility

Wonseok Choi, Chune Young Chung, Monika K. Rabarison, Kainan Wang

Research output: Contribution to journal › Article › peer-review

4 Scopus citations

Abstract

We examine the effect of related party transactions on corporate environmental responsibility and find that firms with more related party transactions tend to have more controversial environmental reports, less emissions reduction, and less environmental expenditures. This relationship is more significant for firms with a high investment-cash flow sensitivity and those with a low ESG score. Overall, the results corroborate the hypothesis that the marginal costs of corporate environmental responsibility outweigh the benefits for financially constrained firms, thus deterring these firms from engaging in corporate environmental responsibility activities.

Original language	English
Article number	102490
Journal	Finance Research Letters
Volume	46
DOIs	https://doi.org/10.1016/j.frl.2021.102490
State	Published - May 2022

Keywords

Corporate environmental responsibility
Corporate governance
Internal capital market
Pollution emission
Related party transaction

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10.1016/j.frl.2021.102490

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title = "Related party transactions and corporate environmental responsibility",

abstract = "We examine the effect of related party transactions on corporate environmental responsibility and find that firms with more related party transactions tend to have more controversial environmental reports, less emissions reduction, and less environmental expenditures. This relationship is more significant for firms with a high investment-cash flow sensitivity and those with a low ESG score. Overall, the results corroborate the hypothesis that the marginal costs of corporate environmental responsibility outweigh the benefits for financially constrained firms, thus deterring these firms from engaging in corporate environmental responsibility activities.",

keywords = "Corporate environmental responsibility, Corporate governance, Internal capital market, Pollution emission, Related party transaction",

author = "Wonseok Choi and Chung, {Chune Young} and Rabarison, {Monika K.} and Kainan Wang",

note = "Funding Information: This research did not receive any specific grant from funding agencies in the public, commercial, or not-for-profit sectors. Publisher Copyright: {\textcopyright} 2021 Elsevier Inc.",

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AU - Choi, Wonseok

AU - Chung, Chune Young

AU - Rabarison, Monika K.

AU - Wang, Kainan

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N2 - We examine the effect of related party transactions on corporate environmental responsibility and find that firms with more related party transactions tend to have more controversial environmental reports, less emissions reduction, and less environmental expenditures. This relationship is more significant for firms with a high investment-cash flow sensitivity and those with a low ESG score. Overall, the results corroborate the hypothesis that the marginal costs of corporate environmental responsibility outweigh the benefits for financially constrained firms, thus deterring these firms from engaging in corporate environmental responsibility activities.

AB - We examine the effect of related party transactions on corporate environmental responsibility and find that firms with more related party transactions tend to have more controversial environmental reports, less emissions reduction, and less environmental expenditures. This relationship is more significant for firms with a high investment-cash flow sensitivity and those with a low ESG score. Overall, the results corroborate the hypothesis that the marginal costs of corporate environmental responsibility outweigh the benefits for financially constrained firms, thus deterring these firms from engaging in corporate environmental responsibility activities.

KW - Corporate environmental responsibility

KW - Corporate governance

KW - Internal capital market

KW - Pollution emission

KW - Related party transaction

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Related party transactions and corporate environmental responsibility

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Keywords

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