R&D investments and corporate carbon emissions: The moderating roles of CEO risk-averse and BOD independence

Abstract

Irreversible and global climate crisis stemmed from saturated carbon dioxide is worsening. Fortunately, enterprises can reduce the CO₂by product and process innovation. Prior studies asserted that several firms utilize environmental innovation strategy to obtain both the carbon and financial performances. R&D investments are heavily linked to the environmental innovation, which is also emphasized by IPCC. This study conducted an empirical analysis aiming to find the influence of corporate R&D investments on carbon emissions, and the moderating effect of CEO risk-averse and BOD independence on the linkage between the two. A total of 211 non-financial American firms during the period from 2012 to 2021 were utilized. The results of the analysis are as follows. First, corporate R&D investments successfully reduced carbon emissions through environmental innovation. Second, the negative relation between R&D investments and carbon emissions was strengthened if the CEO risk-averse, measured by the CEO debt-equity ratio, lowers and the BOD independence, measured by the non-executive director ratio, rises. Third, conducting separate empirical analysis during the period of the COVID-19 pandemic, the weakening effect of CEO risk-averse on the relationship between R&D investments and carbon emissions was amplified. The findings of this study supplemented additional evidence insisting on the importance of R&D investments for carbon reduction. Furthermore, the study illuminated the governance mix of CEO compensation and BOD independence for the strengthened relation between R&D investments and carbon reduction. It can be expected that BOD may complement the irrational decision-making of the CEO.