Corporate carbon emissions mitigation through democracy worldwide: The role of societal trust and stock market development

Abstract

This paper examines the potential impact of a country's democracy level on firm carbon emissions. The study analyzes data from 10,432 unique firms operating in 53 countries worldwide, over the 17-year-period from 2002 to 2019. The results indicate that firm carbon emissions will be reduced when the degree of democracy is higher. In addition, the influence of societal trust and stock market development level on the relationship between democracy and carbon emissions is also employed. The empirical findings indicate that there exists a stronger inverse association between democracy and corporate carbon emissions in nations that have a greater level of social trust. Conversely, the relationship is less pronounced in countries with a developed stock market. The robustness of these results is maintained when alternative measurements of carbon emissions and two-stage systems generalized method of moments estimation (GMM) to address endogeneity are utilized. The results of this study might be useful, advantageous to companies and legislators, also supportive for further research.