"Legal Origins, Corporate Governance and Environmental Outcomes"

Abstract

Environmental governance has emerged as a recent perspective to explain the link between corporate governance mechanisms and environmental performance such as pollution reduction. We extend current models by incorporating the crucial role of the underlying social logics in terms of an a priori focus on either shareholder rights or stakeholder inclusion, which, in turn, can be traced back to the legal origin – and associated underlying philosophies – of a specific country. Using data on a sample of common and non-common law countries we find support for our predictions that a shareholder focused common law legal origin is associated with significantly higher emissions of CO2, and that this effect happens both, directly as well as via an influence on, and further moderation of, the particular governance structure in a given country. Moreover, we demonstrate that international agreements like the Kyoto protocol contribute to the evolution and isomorphic tendencies among social logics by particularly introducing stakeholder ideas into common law logics, causing significantly stronger improvements in CO2 emissions in common than in non- common law countries.