Strategic Discretion and Environmental Governance: CEO Power, Institutional Pressures and Corporate Climate Risk Disclosure

Abstract

This study examines the relationship between CEO power and corporate climate risk disclosure (CCRD) and the moderating role of institutional pressures in this relationship. The panel data from Chinese A‐share‐listed firms over 2010–2024 indicate that firms led by powerful CEOs disclose low levels of climate risk. However, this negative association is attenuated when firms operate under strong government environmental regulation, receive extensive media attention and face heightened public environmental concern, consistent with the view that formal enforcement and informal scrutiny constrain managerial discretion over strategically sensitive transparency choices. Our results remain robust across alternative specifications and lag structures and persist after endogeneity concerns are addressed using propensity score matching and instrumental‐variable estimation, with CEO dismissal serving as an instrument for CEO power. Additional heterogeneity tests show that the negative CEO power–CCRD association is present in SOEs and non‐SOEs and highly pronounced outside manufacturing. This notion indicates that sectoral contexts shape the extent to which executive power translates into selective transparency. Further analyses indicate that the negative association is stronger for transition risk disclosure than for physical risk disclosure. The overall effect is primarily driven by structural, ownership and prestige power, whereas expert power is positively related to disclosure. The findings have important implications for environmental policymakers, investors and the design of corporate environmental strategy in emerging markets transitioning towards standardised climate reporting.