Analyzing climate change exposure and CEO turnover : evidence from U.S. firms

This work explores the link between CEO turnover patterns and firms' climate change exposure in a data set of over two thousand U.S. publicly traded firms. The findings demonstrate that CEO turnover is negatively associated with measures of climate change exposure developed with machine learning based on the frequency of discussions linked to climate change in the firms' earnings conference calls. The results further indicate that this significant negative relationship exists in the year after the CEO's departure from the firm, not before their departure. CEO turnover scenarios differ in their impact on a firm's climate change exposure and sentiment. The focus of a firm's management and financial analysts covering the firm can shift away from the issues of climate change. The negative and significant relationship with firms' climate change exposure is observed particularly for forced CEO departures in firings or resignations, as well as for outsider CEO replacements. No significant relationship is found for CEO departures due to retirement or for cases of internal CEO succession. The results provide insights for decision makers, investors and boards of directors trying to evaluate the role of CEO turnover in climate change exposure at firms.