ESG and CEO Turnover

Abstract

We investigate how negative media attention to stakeholder issues ("ESG risk") affects CEO turnover in different countries. The likelihood of turnover increases significantly when a firm's ESG risk reaches extreme levels. Results from a kink regression discontinuity design support the interpretation that the effect is causal. Using an international sample allows us to consider covariates not only at the individual, firm, and industry levels, but also at the country level. In civil-law countries or in firms with more stakeholder-oriented boards, negative media coverage (shaming effect) is enough to trigger a CEO turnover regardless of whether it is accompanied by a stock price decline (materiality effect).