Political Appointment of Executives, Green Action and Firm Performance: Evidence From the World Bank Enterprise Survey

Abstract

Environmental sustainability and political influence increasingly shape corporate strategy, yet the link between politically appointed executives and firms' environmental actions remains underexplored. This study investigates whether political appointments to top executive positions influence the adoption of green action initiatives and how these initiatives, in turn, affect firm performance. Using World Bank Enterprise Survey data from 28,042 firms across 41 Middle Eastern and North American countries (2018–2020), we examine five environmental practices to construct a green action index and analyse its mediating role in the political appointment–performance relationship. Our results show that firms led by politically appointed executives are significantly more likely to adopt green initiatives, even after controlling for firm characteristics and institutional factors. We further find that green action partially offsets the otherwise ambiguous or adverse association between political appointments and sales growth, indicating that environmental initiatives serve as a strategic legitimacy mechanism. This mediating effect is particularly pronounced in publicly listed firms, where external scrutiny is higher. The study contributes to research on political connections, ESG strategy and firm performance by demonstrating that green action is not merely compliance-driven but a strategic response to political embeddedness, offering practical insights for policymakers, investors and corporate boards.