Director's network location and corporate environmental investment in the carbon neutrality age

Abstract

AbstractAlthough carbon neutrality is a global aim, the potential drivers and influence mechanisms of corporate governance communities are unclear. This study examines the impact of director's network location on corporate environmental investment (CEI) and explores potential channels for CEI performance changes. Using a sample of 495 listed firms in China from 2015 to 2019, we construct a director‐based network using contacts of independent company directors. Results indicate that director's network location has positive economic impacts on CEI performance and that financing constraints are an important mechanism of director's networks affecting CEI. Director's networks positively affect corporate performance by improving CEI. Results are robust to endogeneity concerns and contribute to the CEI literature by showing a positive effect between director's network and CEI, as well as between director's network and enterprise value. This paves the way for policymakers, managers, and investors to understand the influence of director's network on CEI performance.