Corporate Governance and Environmental Sustainability: The Moderating Role of the National Institutional Context

Abstract

Abstract This study aims to show that the effectiveness of corporate governance in improving firms’ environmental sustainability depends on the national institutional context. Using a sample of 210 firms from 14 countries in North America and Europe, our findings show that regulatory pressures discourage independent directors and separate board chairs to promote environmental sustainability whereas normative pressures have the opposite effect for these two governance mechanisms. We also found a positive moderating effect in relation to cognitive pressures for independent directors. We make a unique contribution to the literature by combining corporate governance and institutional factors to explain firms’ environmental sustainability. Although there is a growing consensus that institutions matter to corporate governance, there has been little research on how environmental institutional pressures may moderate the relationship between corporate governance mechanisms and environmental sustainability. Copyright © 2014 John Wiley & Sons, Ltd and ERP Environment