The Power of Informal Governance: Community Social Capital and Corporate Pollution

This study focuses on the influence of headquarters’ community social capital on facility-level corporate pollution. Our findings reveal that facility pollution is lower for when firms are located in communities with higher social capital, because those communities help develop shared norms within firms and thereby instill reciprocity values on facilities. Further, we find that firm’s pro-social values and CEO’s long-term horizon help to strengthen the negative influence of community social capital on facility pollution due to the value alignment. In contrast, facility-level contexts such as facility’s community social capital and geographic location overshadow such a negative effect. Based on a sample of U.S. firms during the period of 1998-2015, we find empirical support for our predictions.