Where CEOs come from matters: a geographical perspective on ESG decoupling

Purpose Why do firms exhibit different levels of environmental, social and governance (ESG) decoupling? Drawing on the place identity theory, this study aims to investigate how CEO geographical origins (whether CEOs work in their hometowns) affect corporate ESG decoupling. Furthermore, to better confirm the place identity mechanism underlying the linkage between hometown CEO and ESG decoupling, we identify Confucian culture and dialect diversity as two salient contextual factors. Design/methodology/approach To address the potential endogeneity associated with hometown CEO, the authors used generalized estimating equations (GEE) for hypothesis testing. In the GEE models, the authors specified a Gaussian distribution, used an identity link function and applied an exchangeable within-group correlation structure. Findings The authors find that firms led by hometown CEOs exhibit lower levels of ESG decoupling than those led by non-hometown CEOs. Furthermore, this hometown identity effect is more pronounced for firms headquartered in regions with stronger Confucian culture and less pronounced in regions with greater diverse dialects. Originality/value The findings advance our understanding of the emotional antecedents of ESG decoupling and the decoupling outcomes of CEO hometown identity. Moreover, by examining how Confucian culture and dialect diversity interact with CEO hometown identity to affect ESG decoupling, this study extends the boundary conditions of place identity theory in explaining firms’ decoupling behaviours.