Toxic Emissions And Executive Departures

Abstract: We evaluate the impact of toxic-emitting plant openings on executive departures from neighboring firms and the stock prices of those firms, shedding light on the determinants and consequences of executive turnover and the external effects of pollution by polluting firms on other companies and their stakeholders. After creating a unique database on the career paths of executives at S&P 1500 firms, we discover that toxic-emitting plant openings increase executive departures from neighboring firms from an average annual separation rate of about 12% to a 16% separation rate and decrease their stock prices by over 10%. The impact is especially pronounced when plants and firms are geographically close, executives have more general human capital, and they spend more time at the treated firms. Our findings suggest that pollution by one set of firms can substantially affect neighboring firms by inducing incumbent executives to relocate to firms in cleaner environments.

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