Interlocking Directors in Corporate Environmental Performance: Evidence from China

This paper examines how interlocking directors facilitate the transmission of green strategies across connected firms. Exploiting a place-based green financial policy as an exogenous shock, we provide causal evidence of the transmission effect on green practice. Evidence on potential channels suggests that focal firms exhibit greater environmental attention following the adoption of green practices by their connected pilot firms. This effect is stronger when corporate governance constraints are weaker. Moreover, we find that the transmission effect is more pronounced in less polluting, more monopolistic industries, as well as when interlock networks facilitate stronger information flows. Overall, our findings highlight interlocking directors as an important governance factor for the transmission across firms.