Managerial short-termism and ESG

Chen Lin, Lai Wei, Nan Yang, Yupu Zhang

Research output: Working paper

Abstract / Description of output

While practitioners call for long-term managerial compensation to promote firms’ commitment in environmental, social and governance (ESG) issues, little direct evidence exists on the role managerial incentive horizon plays in firms’ ESG performance. Exploiting two alternative identification strategies, we find consistent evidence that firm ESG performance declines when CEO short-term incentive becomes stronger. We find similar results using other ESG measures including worker injuries and pollution. Together, the evidence suggests that CEO compensation that promotes long-termism is critical for ESG.
Original languageEnglish
PublisherSocial Science Research Network (SSRN)
Publication statusE-pub ahead of print - 6 Jul 2021

Keywords / Materials (for Non-textual outputs)

  • corporate ESG
  • CEO short-termism
  • option vesting
  • governance
  • FAS 123-R


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