Board Characteristics, External Governance and the Use of Renewable Energy: International Evidence From Public Firms

Abstract

Adoption of renewable energy is one of the most important steps taken to cope with global warming and achieve sustainability. While its supply has seen a global boom, the adoption of renewable energy from the critical demand side faces clear challenges. This paper investigates firms’ use of renewable energy, paying special attention to factors in internal corporate governance and external governance. Based on 1,027 listed companies in 47 countries or regions, we show statistically significant evidence that both internal and external governance matter for firms’ adoption of renewable energy. We also find significant interactions between internal and external factors. Specifically, board duality and higher executive share reduce renewable energy adoption, strong external governance increases renewable energy adoption, and firms in common law systems tend to use fewer renewables. Our results are robust to different specifications, which allows us to tell an international demand-side story to complement the narrative on supply.

Keywords: Board characteristics; Corporate governance; External governance; Legal origin; Renewable energy

JEL Classification: G3, K2, Q2