CEO power and ESG performance – The moderating effect of CEO characteristics

dc.contributorAalto Universityen
dc.contributorAalto-yliopistofi
dc.contributor.advisorKautto, Daria
dc.contributor.authorKukkohovi, Anna
dc.contributor.departmentJohtamisen laitosfi
dc.contributor.schoolKauppakorkeakoulufi
dc.contributor.schoolSchool of Businessen
dc.date.accessioned2024-05-19T16:14:39Z
dc.date.available2024-05-19T16:14:39Z
dc.date.issued2024
dc.description.abstractThe objective of this study is to examine the relationship between CEO power and firms’ ESG performance, and to investigate the moderating effects of CEO age, gender, and duality on this relationship. The study aims to increase the general understanding of the role of CEO power and characteristics in influencing firms' ESG which is crucial for corporate governance and sustainability practices and an extremely current topic. The sample includes 20758 firm-year observations of North American firms from the years 2003-2018. The main findings of the study indicate a negative relationship between CEO power and ESG performance. This suggests that powerful CEOs tend to have less consideration for ESG relatedissues, resulting in worse ESG performance. This is consistent with existing research and supports the view that CEOs with excessive power may prioritize their own interests over CSR activities. Additionally, the study found that the negative relationship between CEO power and ESG performance is strengthened when the CEO also serves as the chair of the board, further emphasizing the importance of appropriate corporate governance structures. Furthermore, the results suggest that the negative relationship between CEO power and ESG performance may be weakened by younger CEOs but did not provide support for the positive moderating effect of female CEOs. However, it is important to note that the small number of female CEOs in the sample limits the reliability of the results. Further research with a different sample would need to be conducted to validate these results. The theoretical contributions of this study lie in its examination of how different sources of CEO power impact the relationship between CEO power and ESG performance, as well as in the investigation of the moderating effects of CEO age, gender, and duality. By considering three different proxies to measure CEO power, the study provides a more comprehensive understanding of how different sources of power impact firms' ESG performance. Furthermore, the study addresses a gap in academic literature by exploring the combined effects of CEO power and the selected CEO characteristics on ESG performance. In addition, the findings suggest that firms should pay attention to the level of power held by the CEO, as firms with powerful CEOs tend to exhibit worse ESG performance. This is particularly important for firms seeking to improve their ESG ratings. Firms should also consider implementing appropriate control mechanisms to prevent CEOs from having excessive power, as this can lead to increased agency problems and weaker corporate governance, ultimately affecting ESG performance. Future research should further expand on these findings and explore other dimensions of CEO power and characteristics in relation to ESG performance.en
dc.format.extent98 + 8
dc.identifier.urihttps://aaltodoc.aalto.fi/handle/123456789/127877
dc.identifier.urnURN:NBN:fi:aalto-202405193485
dc.language.isoenen
dc.locationP1 Ifi
dc.programmeManagement and International Business (MIB)en
dc.subject.keywordESGen
dc.subject.keywordCSRen
dc.subject.keywordCEO poweren
dc.subject.keywordCEO characteristicsen
dc.subject.keywordESG ratingsen
dc.titleCEO power and ESG performance – The moderating effect of CEO characteristicsen
dc.typeG2 Pro gradu, diplomityöfi
dc.type.ontasotMaster's thesisen
dc.type.ontasotMaisterin opinnäytefi
local.aalto.electroniconlyyes
local.aalto.openaccessno
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