Corporate governance mechanisms and renewable energy transition
Abstract
Purpose
The intensity of carbon emissions has led to the serious problem of global warming, and the consequences in terms of climatic disasters are gaining increasing attention worldwide. As the energy sector is responsible for most global emissions, developing clean energy is crucial to combat climate change. This study aims to examine the relationship between corporate governance and renewable energy (RE) consumption and explore the interaction between RE production and RE use.
Design/methodology/approach
The study adopts an econometric framework of a panel model, followed by the robustness check using alternative methods, including logit regressions. The bivariate probit model is used to analyze the interaction between the decision to use and the decision to produce RE. The analysis is based on a sample of 3,896 firms covering 45 countries worldwide.
Findings
The results reveal that appropriate governance mechanisms positively impact RE consumption. These include the existence of a sustainability committee; environmental, social and governance-based compensation policy; financial performance-based compensation; sustainability external audit; transparency; board gender diversity; and board independence. Firms with appropriate governance mechanisms are more likely to produce and use RE than others. Finally, while RE use positively impacts firm value and environmental performance, the authors find no significant effect on current profitability.
Originality/value
This study goes beyond previous research by exploring the impact of multiple governance mechanisms. To the best of the authors’ knowledge, this is also the first study examining the relationship between RE use and firm value. Overall, the findings suggest that RE transition requires, first of all, establishing appropriate governance mechanisms within companies.
Keywords
Acknowledgements
Funding statement: Marcellin Makpotche is grateful to the FRQSC – Fonds de recherche du Québec, Société et Culture (Grant #2022-B2Z-306951) for providing financial support for this project. The views and conclusions contained in this document are those of the authors. There is no conflict of interest.
The authors would like to thank two anonymous referees and editors for their valuable comments and suggestions. The authors would also like to express their gratitude to Lawrence Kryzanowski (Concordia University, Canada) and Jean-Pierre Gueyie (University of Quebec in Montreal, Canada) for their valuable insights and suggestions. All errors are the authors’ responsibility.
Compliance with ethical standards.
Disclosure of potential conflicts of interest: There is no conflict of interest and declarations of interest. All authors have seen and agree with the manuscript’s contents, and there is no financial interest to report. The manuscript is our original work, has not received prior publication, and is not under consideration for publication elsewhere.
Research involving human participants and/or animals (if applicable): not applicable.
Informed consent (if applicable): not applicable.
Citation
Makpotche, M., Bouslah, K. and M’Zali, B.B. (2023), "Corporate governance mechanisms and renewable energy transition", Corporate Governance, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/CG-06-2023-0245
Publisher
:Emerald Publishing Limited
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