Bias is Not Always a Bad Thing: Non-Local CEOs and Environmental, Social and Governance Performance

This study builds on social identity perspective, to examine the influences on environmental, social and governance (ESG) performance of non-local CEOs. We argue that because non-local CEOs who are perceived as out-group members by the local stakeholders, companies with non-local CEOs would engage in a higher level of ESG performance to enhance their trustworthiness, legitimacy status, and the availability of local resources as a response to intergroup bias. Moreover, we explore the moderating role of organizational and environment factors (i.e., Confucianism, media coverage and firm slack). We show that companies located in the richer Confucianism region and faced on more media coverage will promote the relationship between non-local CEOs and ESG performance; conversely, firms with less slack will ease the positive relationship between non-local CEOs and ESG performance. Our empirical evidence, from 836 firms in China during 2006 - 2019, support for our ideas.