The Impact of Foreign Managers’ Home Countries on Firm Environmental Performance

Abstract

With climate change becoming an increasingly discussed topic, research has turned to focus on how firms can improve their sustainability. One factor that affects firm environmental performance is manager characteristics. I use a dataset of European firms and their managers to investigate how the environmental policy stringency of a manager’s home country impacts firm environmental performance. Using fixed effects regressions, I show that adding new managers has a positive effect on firm environmental performance and that this effect is much larger when the new managers are foreign. I further find that the difference between the environmental policy stringency of a manager’s home country and firm country does not have a significant effect on firm environmental performance, which indicates that managers coming from countries with less stringent environmental policy than the firm country do not have a negative effect on ESG.