Lawyers in the boardroom and firms’ environmental performance

Abstract

This paper studies whether and how firms’ legal environment influences their environmental performance. After presenting new evidence on the positive link between civil law origin and firms’ environmental outcomes, we propose and show that directors with legal study or work experience exert a stronger impact on firms’ environmental outcomes in civil law than in common law countries. The results suggest the compliance effect of legal directors is stronger for firms located in civil law countries than the litigation risk effect for firms in common law countries. Using a quasi-natural experiment of the Paris Agreement, we find evidence consistent with our interpretation.