CEO turnover, ESG‐washing, and firm value

Abstract

This study investigates the effects of chief executive officer (CEO) turnover on myopic investment decisions and firm value. A variable for environment, social, and governance (ESG)‐washing is designed and employed as an alternative proxy for myopic investment. We find that firms with more frequent CEO turnover are more likely to engage in ESG‐washing as a form of myopic investment to meet short‐term performance goals. In addition, firms that engage in ESG‐washing report lower firm value than firms that are not involved in ESG‐washing because the lack of substantive investment accompanying these activities ultimately deteriorates firm reputation and value in return for short‐term improvement in ESG performance.