Resumo

In recent years, environmental innovation has become part of the business strategy due pressure from various stakeholders such as competitors, suppliers, consumers and regulators (Biscione et al., 2020). In this line, environmental innovation has a key role in providing solutions for renewable energy generation, energy efficiency, decarbonization, among other environmental issues (Losacker & Liefner, 2020). In this regard, executives see investment in social and environmental activities as a strategy to improve firm performance and align their interests with those of shareholders.

The objective of the paper is to analyze the influence of executive compensation on the environmental innovation disclosure. Theoretically, the effect of executive compensation on environmental innovation disclosure can be explained using agency theory. According to the agency theory the disclosure of non-financial information, such as environmental disclosure, can be a way for companies to reduce information asymmetry, the cost of capital and share more information with shareholders (Mio et al., 2020).

Firms are adopting environmental innovation as a strategy to achieve environmental sustainability (Song et al., 2020). Engaging executives in social and environmental activities can be seen as their fiduciary duty and by investing in social and environmental activities they can improve shareholder value (Karim et al., 2018). Managers tend to be encouraged to disclose environmental information in a correct way, with the objective of reducing information asymmetry in relation to shareholders (Kartadjumena & Rodgers, 2019).

The sample consists of 81 listed firms on the B3 (Brazil Stock Exchange and Over-the-Counter Market) collected from 2015 to 2019. We test our hypotheses using the generalized method of moments (GMM) system estimator appropriate for relatively short periods (Blundell & Bond, 1998). GMM method is based on the assumption that the variables in the model are valid instruments and the error terms are not serially correlated (Crisóstomo et al., 2020; Crisóstomo & de Freitas Brandão, 2019). Environmental innovation disclosure is presented in this study as the dependent variable.

We find a negative and significant relationship between salary-based compensation and environmental innovation disclosure. This result is consistent with, agency theory. A positive and insignificant relationship between bonus-based compensation and environmental innovation disclosure was also found. In addition, we noted a positive and insignificant relationship between stock-based compensation and environmental innovation disclosure.

This study analyzes the link between executive compensation and environmental innovation disclosure. Using a data of 81 listed firms on the B3 (Brazil Stock Exchange and Over-the-Counter Market) collected from 2015 to 2019, we employ two-step system GMM to test study hypotheses. We measure environmental innovation disclosure as the ratio between the aggregate of 23 items focused on environmental innovation issues and the total number of items analyzed. This study suffers of some limitations. We also noted that few firms disclose their environmental aspects.

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