How and when does top management team regulatory focus influence firm environmental misconduct?

Abstract

Does top management team (TMT) regulatory focus impact firm environmental misconduct (FEM)? If so, how and when? Integrating upper echelons theory with regulatory focus theory, we examine how regulatory focus, as one of the most direct and important psychological characteristics of TMT, impacts FEM. Additionally, we explore how this relationship is moderated by external and internal environmental dynamism from the perspective of regulatory fit. Based on a sample of Chinese listed firms from 2011 to 2017, we conduct computer-aided content analysis to quantify TMT regulatory focus. Results show that TMTs high in promotion focus are more likely to engage in FEM, whereas TMTs high in prevention focus are less likely to misconduct. Moreover, external environmental dynamism strengthens (weakens) the positive (negative) relationship between promotion (prevention) focus and FEM. Internal environmental dynamism strengthens the positive relationship between TMT promotion focus and FEM. By examining this motivation-based psychological characteristic of TMT, the findings suggest the need to consider TMT regulatory focus when analyzing the antecedents of FEM.