Not In My Backyard: Intrinsic Motivation And Corporate Pollution Abatement

Abstract We investigate whether managers’ intrinsic incentives affect firms’ environmental policies. Exploiting within-facility variation in facility-to-CEO-birthplace distances, we find that facilities located near CEOs’ birthplaces experience toxic emission reductions relative to those farther away. This is achieved by reducing waste generation at source rather than by downsizing operations or substituting pollution across locations. The effect is strongest for hometown facilities in high-polluting areas, and in firms with higher cash holdings and with CEOs with weaker pay incentives. Our results suggest that local representation in management could be a powerful means of encouraging corporate pollution abatement.