Fear of fairness in courts: The impact of liberal judge ideology on corporate carbon emissions

Abstract

We document that firms under the jurisdiction of circuit courts with predominantly liberal judges significantly reduce their carbon footprints. This is likely due to liberal judges' stricter enforcement of environmental regulations and their propensity to impose hefty penalties for violations. Interestingly, firms committed to corporate social responsibility and those with high institutional ownership are less deterred by liberal courts, viewing stricter oversight as consistent with their values. Conversely, firms in environmental-litigation-prone industries are particularly cautious, further cutting emissions to avoid potential financial and reputational damage. These findings highlight the profound impact of judicial ideology on corporate environmental behavior and hold important implications for both policymakers and businesses.