THE ROLE OF CORPORATE GOVERNANCE IN REDUCING CARBON EMISSION DURING COVID-19: A GLOBAL PERSPECTIVE

Abstract

Greenhouse gas emission is primarily responsible for global warming and climate change, which are significantly impacting air quality, human health, business activity, and the overall economy. Corporate governance plays a critical role in determining how well companies manage the risks associated with climate change (Ko & Tai, 2019; Luo & Tang, 2021; Peters & Romi, 2014; Sullivan & Gouldson, 2017). The COVID-19 pandemic provided a natural experiment, when all aspects of human life were disrupted, to examine how corporate governance can influence a company's response to carbon emission. This study examines the relationship between corporate governance and carbon emission reduction at the micro and macro levels. It also examines this relationship before and during the COVID-19 pandemic. The sample consists of 2,226 public firms from 41 different countries during the period 2018-2021. The data are obtained from the Refinitiv Workspace database and IQAir. To test the hypotheses, the study employs ordinary least squares (OLS) multiple regression analysis to identify the relationship between corporate governance and carbon emission reduction before and during the COVID-19 period. The empirical findings reveal a positive and significant association between the effectiveness of corporate governance and carbon emission reduction. The results also indicate that the strength of the relationship between corporate governance and carbon emission reduction varies for the period prior to the pandemic relative to the period during the pandemic. Furthermore, the results suggest that the East Asia & Pacific, Eastern Europe & Central Asia, Latin America & the Caribbean, and South Asia regions are associated with a greater reduction in carbon emission during COVID19 relative to other regions. This study contributes to the growing accounting literature on corporate governance and carbon emission and provides evidence regarding how corporate governance has affected carbon reduction during a significant global crisis.