Research

My research explores how firms strategically or symbolically respond to a variety of institutional pressures regarding sustainability.

Working project 3

ESG rating ambiguity, institutional incompatibility, and investment decisions

Bingkun Zhang, and Shipeng Yan

Working project 3

Abs

Abstract:Rating ambiguity, defined as the divergence of multiple ratings across different agencies, is often considered a problem for audience members, because extant research assumes that they use ratings for evaluation purposes and rating ambiguity makes products hard to evaluate. We extend this literature by theorizing how audience members may welcome rating ambiguity and use it to rationalize controversial decisions so that these decisions can appear simultaneously congruent with incompatible institutional demands from multiple logics. We analyze a panel dataset comprising 7,248 stocks across 67 countries between 2006 and 2021, focusing on green stocks and sin stocks that exemplify persistent incompatible institutional demands in the context of environmental, social, and governance (ESG) investing. We find that ESG rating ambiguity increases ESG investor holding in sin stocks, an effect strengthened by the maximum score of the multiple ratings, and decreases ESG investor holding in green stocks, an effect strengthened by the minimum score. Our findings remain, after using a difference-in-differences analysis based on a regulatory shock, addressing a key alternative explanation (i.e., ESG investors prefer financial returns as a non-ambiguous criterion to ambiguous ESG ratings) and using different measures and rating coverages.

Working project 2

Physical Climate Change Exposure and Carbon Emission Outsourcing

Bingkun Zhang, and Kevin Zhou

Working project 2

Abs

Abstract:This study explores how firms strategically outsource their carbon emissions to suppliers in response to physical climate change exposure. By analyzing a panel dataset comprising 3,763 U.S. firms between 2001 and 2021, we find that a firm’s physical climate change exposure is negatively related to its carbon emissions but positively related to its supplier’s carbon emissions, leading to an insignificant effect on the overall emissions. We use the most damaged hurricanes as quasi-exogenous climate shocks and focus on firms that are headquartered in the neighborhood of the disaster area to address alternative explanations. Further mechanism tests support our logic that physical climate change exposure heightens both managers’ and stakeholders’ climate change awareness, which induces firms to outsource carbon emissions to suppliers. We contribute to the research on climate change and pollution outsourcing by revealing a symbolic management tactic of climate change pressure.

Working project 1

Technical or Communication Green Skills: Climate Policy and Green Hiring Strategy

Bingkun Zhang, and Shipeng Yan

Working project 1

Abs

Abstract:How does a firm’s green hiring strategy change in response to rising climate challenges? Using 32 million U.S. job postings between 2010 and 2019, we capture firms’ demand for technical green human capital (i.e., skills for substantive green transition) and communication green human capital (i.e., skills in communicating a green corporate image) based on the type of green skills required in firms’ job postings. We theorize and find that, when a climate regulation reduces the evaluative uncertainty a firm faces in making sustainability-related decisions, firms engage more in hiring human capital for technical green skills while hiring less for communication green skills. We find confirmatory evidence by analyzing the California’s Cap-and-Trade policy with a difference-in-difference approach.