Abstract:

We analyze the effect of CEO education on environmental decision-making. Using a unique sample of Danish firms from 1996 to 2012, we find that CEO education significantly improves firms’ energy efficiency. We derive causality using health shocks: the hospitalization of highly educated CEOs induces a drop in energy efficiency, whereas the hospitalization of less educated CEOs does not have any significant effect. Exploring the mechanisms at play, we show that our results are driven by the length rather than the field of education. Moreover, CEO education improves corporate energy efficiency through personal environmental awareness: highly educated CEOs exhibit greater concerns for climate change, as measured by a survey of social preferences, and drive more environmentally-efficient cars. Taken together, our findings suggest that education shapes managerial styles giving rise to greater sustainability in corporate actions.