Join us for an ERIM research seminar
Abstract
Political change within democracies can weaken national commitments to collective societal goals while leaving firms exposed to divergent regulatory demands across jurisdictions. We examine how internal governance supports corporate environmental action amid such policy volatility. Drawing on resource dependence theory, we argue that preexisting board environmental expertise helps firms interpret and integrate conflicting climate policy signals following a national policy reversal. We predict that firms with such expertise reduce carbon emissions more than firms without it and that this relationship strengthens when firms’ operations expose them to stringent national climate regulation in foreign markets and stringent state climate regulation at home. We study United States S&P 500 firms surrounding the 2017 announcement of the United States’ intention to withdraw from the Paris Agreement using a difference-in-differences design. By conceptualizing national policy reversal as a source of jurisdictional divergence rather than uniform deregulation, our study connects corporate governance to institutional resilience under geopolitical fragmentation and explains how boards help firms navigate changing relationships among business, government, and society.
