Proposal Presentation FINAL.pptx

东北财经大学
Dongbei University of Finance and Economics
Applicant:尤瑟夫
PhD Supervisor: 王满
Dalian, 2021/04
Title
Board capital and green innovation: Evidence from Chinese listed firms
School of Business Administration

PRESENTATION CONTENTS
 Introduction
 Research Motivation and Objectives
 Conceptual framework
 Theoretical framework
 Practical value
 Research gap and Significance of the study
 Literature review and Hypothesis development
 Research Methods
 Innovation points
2

INTRODUCTION
 China’s unmatched economic growth is accompanied by different political, social, and environmental challenges.
 Its CO2 emissions witnessed a growth of 1.2 percent per year over the 2010-2019 period.
 China is ranked number one in the world with 10,174.68 Metric tons of CO2 emissions in 2019.
 Confronted with massive environmental challenges, Chinese firms, in particular, initiated various plans to integrate environmental
issues into their business strategies.
 In the given context, Green Innovation has emerged as a key strategic tool to achieve sustainable development.
 As green innovation has strategic relevance, researchers are finding corporate governance answers to improve it.
 Corporate governance nowadays revolves around Boards (Naciti, 2019).
 Firms too, in today’s world tend to have boards even when they are not legally required to have one (Villalonga et al., 2019).
 Boards are expected to exert an increasingly active role towards organizational prosperity (Lai et al., 2019; Martin et al., 2015) and
green innovation performance (Galia et al., 2015; He and Jiang, 2019).
 In spite of this, Board Capital which captures the board’s intrinsic ability to perform (Fernandez et al., 2019), has not been examined
in terms of Green Innovation.
 The current study purports to fill this gap by examining in-depth, how board capital and its facets (Human and Social capital) impact
green innovation.

INTRODUCTION CONTINUES…
Graph1
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MtCO
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Top 5 countries with highest CO2 emissions
China
U.S.A
India
Russia
Japan
Source: The Global Carbon Budget 2020, Earth System Science Data

CHINESE CONTEXT
 China is the second-largest economy in the world, has several internationally prominent companies (Zhao, 2018), and unique corporate
governance issues, demanding specific solutions (Jiang and Kim, 2015).
 China is also of particular interest to researchers considering special principal-principal agency problems (Jiang and Kim, 2015, 2020;
Sabbaghi, 2016).
 SOEs currently account for one-third of all firms (Jiang and Kim, 2020).
 Although the state retains a stronghold and pursues various public goals, empirical evidence depicts, SOEs exhibit poor performance in China
(Chang and Wong, 2004, 2009; Huangnan et al., 2020; Liu et al., 2012; Sun and Tong, 2003).
 Board independence, which traditionally assumed to bring independent thought (Syahrina et al., 2016), better monitoring (Fama, 1980; Fama
and Jensen, 1983), and resource provision (Chen et al., 2016), does not improve firm performance in China (Farag and Mallin, 2017; Liu et al.,
2014).
 Institutional owners, which are a strong external governance tool, on average hold stocks for only two months, which means they have shorter
time horizons in China (Jiang and Kim, 2015).
 Simply increasing board size also doesn’t lead to superior firm performance in China (Zheng and Tsai, 2019).
 Additionally, the extant literature exhibits departures in terms of the green innovation research at the country level, whereas most of the
research has been done in Europe or the USA.
 Despite continuously exacerbated environmental concerns, a limited number of studies have been carried out in developing countries
(Dangelico, 2016) and there have been calls for further investigation of green innovation in emerging markets such as China (Seebode et al.,
2012; Zhang, Zeng, et al., 2020).
 In the Chinese context, infringements of environmental regulations may cause business shutdowns. Applying green innovation may avoid
such likelihood. Hence, it is essential to fill the gaps in the literature by having more studies from China.

Research Motivation,
Objectives and Conceptual
Framework

Motivation and Research Objectives
Motivated by prevalent corporate governance problems in China and a lack of research on the relationship
between board capital and firm’s strategic decision of green innovation, this study primarily purposes to
investigate the effect of board capital on green innovation strategies and explore the mechanism through which
board capital impacts green innovation.
In addition, it also purports to investigate; how external governance moderates the influence of board capital on
green innovation, and how board capital, green innovation, and the firm’s environmental performance are related.
Accordingly, this study attempts to fulfill four key objectives with their sub-objectives:
Objective 1. To empirically investigate the relationship between board capital and green
innovation in the Chinese non-financial listed companies. To achieve this key objective,
this study tends to address the following sub-objectives:
I. To examine the impact board’s human capital on green innovation in Chinese listed companies.
II. To examine the impact of board’s social capital on green innovation in Chinese listed companies.
III. To examine the impact of overall board capital on green innovation in Chinese listed companies.

RESEARCH OBJECTIVES CONTINUE…
Objective 2. To empirically investigate the mechanism (absorptive capacity) through which board capital impacts green innovation in the Chinese non-financial listed
companies. To achieve this key objective, this study tends to address the following sub-objectives:
I. To examine the mediating effect of absorptive capacity on board’s human capital and green innovation relationship in Chinese listed companies.
II. To examine the mediating effect of absorptive capacity on board’s social capital and green innovation relationship in the Chinese listed companies
III. To examine the mediating effect of absorptive capacity on overall board capital and green innovation relationship in the Chinese listed companies.
Objective 3. To empirically examine the moderating effect of external governance on the relationship between board capital and green innovation in the Chinese non-
financial listed companies . To achieve this key objective, this study tends to address the following sub-objectives:
I. To examine the moderating effect of audit quality on the effect of board’s human capital on green innovation in Chinese listed companies
II. To examine the moderating effect of audit quality on the effect of board’s social capital on green innovation in Chinese listed companies
III. To examine the moderating effect of audit quality on the effect of overall board capital on green innovation in Chinese listed companies
IV. To examine the moderating effect of imitative pressure on the effect of board’s human capital on green innovation in Chinese listed companies
V. To examine the moderating effect of imitative pressure on the effect of board’s social capital on green innovation in Chinese listed companies
VI. To examine the moderating effect of imitative pressure on the effect of overall board capital on green innovation in Chinese listed companies
VII. To examine the moderating effect of media coverage on the effect of board’s human capital on green innovation in Chinese listed companies
VIII. To examine the moderating effect of media coverage on the effect of board’s social capital on green innovation in Chinese listed companies
IX. To examine the moderating effect of media coverage on the effect of overall board capital on green innovation in Chinese listed companies
Objective 4. To empirically investigate the association between board capital, green innovation, and firm’s environmental performance in the Chinese non-financial listed
companies . To achieve this key objective, this study tends to address the following sub-objectives:
I. To examine the impact of board capital on environmental performance.
II. To examine the impact of green innovation on environmental performance.
III. To examine the mediating impact of green innovation on the board capital-environmental performance relationship.

Board capital
External governance
Audit Quality Media coverage
Absorptive capacity
Imitative
pressure
Green innovation
Conceptual framework
Board capital and green innovation: Evidence from Chinese Listed firms
Control variables
Board size
Board independence
Board diversity
Duality
Ownership concentration
Firm size
Firm age
Profitability
Leverage
Capital intensity
Environmental regulations
Analyst coverage
Environmental
Performance

THEORETICAL FRAMEWORK AND
PRACTICAL VALUE

THEORETICAL FRAMEWORK
The literature on board capital and green innovation documents the most relevant
theoretical perspectives including agency theory, resource dependency theory, upper
echelons theory, socio-cognitive theory, legitimacy theory, and stakeholder theory (Chen et
al., 2016; Fernandez et al., 2019; He and Jiang, 2019; Hillman and Dalziel, 2003; Takalo et
al., 2021).
Studies examining the nexus between board characteristics and organizational outcomes
usually follow agency theory (Bathala and Rao, 1995; Fama, 1980; Fama and Jensen,
1983; Guilding et al., 2005), resource dependence theory (Davis and Cobb, 2010; Drees
and Heugens, 2013; Hillman et al., 2000; Pfeffer and Salancik, 1978) or a combination of
these two authoritative perspectives (Aggarwal et al., 2019; Chen et al., 2016).

THEORETICAL FRAMEWORK CONTINUES…
First, studies that follow the agency theory perspective, posit that a key responsibility of the board is monitoring
management on behalf of shareholders, especially through independent directors that can improve firm
performance by reducing agency costs (Al-najjar, 2014; Cornelli et al., 2013; Fama, 1980; Fama and Jensen,
1983; Kor and Sundaramurthy, 2009).
Second, resource dependence theory suggests that, since no firm is self-sufficient, corporate boards play a
crucial role in providing access to critical external resources and information advantageous to firms (Davis and
Cobb, 2010; Horton et al., 2012; Pfeffer and Salancik, 1978). The firms look for board members with experience
and outside links to enhance their resources (Daily and Dalton, 1994).
Third, studies that simultaneously use agency and resource dependence views, argue that missing one
perspective contributes to an incomplete understanding of what board do and how they influence firm
performance (Bammens et al., 2011; Hillman and Dalziel, 2003; Maere et al., 2014; Pugliese et al., 2014).
Hillman and Dalziel (2003) integrate the two views using the terminology of board capital and argue that board
capital affects both monitoring and resource provision roles of the board while board incentives such as
independence, ownership, etc. do not directly impact firm performance. Accordingly, the study argues that
board capital due to improved monitoring and resource provision improves green innovation.

THEORETICAL FRAMEWORK
3. Upper echelons theory sheds light on how director’s and top management team’s skills,
knowledge, experiences, and personalities influence their decision-making process (Hambrick,
2007; Hambrick and Mason, 1984). As green innovation is regarded as a strategic decision
(Walton et al., 1998), top executives’ cognitive base and decisions are expected to influence
green innovation choices. From this perspective, directors that have a high board capital, in the
form of education, expertise, and connections, affect firm strategic decisions of green
innovation (Åberg and Torchia, 2020; Ramón-llorens et al., 2019).
4. The socio-cognitive perspective on organizational decision-making suggests that individuals
cope with complex decision-making tasks by relying upon the knowledge structures they have
developed about their environment (Carpenter and Westphal, 2001; Kiesler and Sproull, 1982).
When these individuals face uncertainty or don’t have clarity of their decision outcomes (such
as in the case of green innovation), they tend to follow a theory-driven rather than data-driven
approach to make decisions. Thus, from this viewpoint also, board members are likely to use
knowledge structures developed from their experience in different environments including other
boards when making decisions (Carpenter and Westphal, 2001) .

PRACTICAL VALUE
The proposed dissertation provides numerous dimensions of practical value.
First, it addresses the problem of fragile corporate governance mechanisms (i.e. board independence, institutional investors, etc.) in the Chinese context and provides an
alternative solution to overcome this weakness by raising board capital and increasing the role of external governance in China. Identifying the weaknesses of current
corporate governance mechanisms and providing an alternative solution in the name of board capital, is very beneficial and extremely important for investors, management,
and policy makers.
Second, as this is the first empirical study that comprehensively examines the role of board capital in the strategically important decision of green innovation, the nexus
between board capital and green innovation will help practitioners in China to pay rigorous attention to board member’s education, experience, and external links for
addressing environmental concerns and sustainable development.
Third, as this study explores the mediating role of absorptive capacity, it underlines that firm’s ability to adapt to rapidly changing external environment is critical for
sustainable development and long-term survival. This has implications for management and policy-makers.
Fourth, the study highlights the importance of three unique external governance mechanisms namely audit quality, imitative pressure and media coverage. These
mechanisms are of practical value to policy-makers for countries where corporate governance systems are still evolving and firm performance is compromised due to
agency problems.
Fifth, the current study links board capital and green innovation to environmental performance. Since environmental concerns have become a global agenda and firms are
increasingly facing pressures from divergent stakeholders to balance among cash flows, profitability, and environmental protection (Dangelico, 2016), regulatory bodies
using current study outcomes, can formulate new corporate governance policies that favor green innovation and environmental protection.
Sixth, the study has implications for shareholders and nomination committee as they may select individuals with better skills, education, expertise, and links to the outside
world, that provide long-term organizational success.
Seventh, conducting this study in emerging country China provides value to academicians. China has a commitment in UN to cut CO2 emissions by 2030, it has a unique
regularity and corporate governance environment. Green innovation has more value to firms in China. All this make China a special case to research the corporate
governance antecedents of green innovation in China.
Lastly, the proposed dissertation provides a comprehensive picture of how corporate governance (board capital) improves green organizational culture which eventually
provides sustainable firm performance. Thus, findings also will enable firm managers to develop a green innovation technology culture.

Research Gap and
Significance of the Study

Research Gap and Significance of the Study
Research Gap
1. Board capital, through active monitoring and resource provision, enhances organizational outcomes
(Chen et al., 2016; Chen, 2014; Ooi et al., 2015). However, it has not been examined in terms of green
innovation.
2. Many studies on board capital have been undertaken in developed economies (Chen, 2014; Maere et
al., 2014; Ramón-llorens et al., 2019), but very few have been performed in developing economies
explicitly addressing board capital and organizational outcomes (Ooi et al., 2015).
3. The Chinese market has a unique financial system and corporate governance mechanisms still
evolving. Board independence and institutional ownership do not resolve the governance issues in
China (Jiang and Kim, 2015).
4. Green innovation has gathered the utmost attention in recent times owing to international commitments
of China (Zhang, Zeng, et al., 2020).
5. Although different studies have examined the corporate governance antecedents of green innovation
(He and Jiang, 2019; Usman et al., 2020), but the role of board capital has not been thoroughly
examined. This dissertation shall address this literature gap by examining in-depth how board capital
influences the strategically important green innovation decision in China.

Research Gap and Significance of the Study Continues…
Research Gap continues..
6. Another unexplored area in literature so far is the mechanism of absorptive capacity through
which board capital influences strategic decisions of green innovation.
7. Besides, prior studies have not explored the factors that moderate the impact of board capital on
green innovation.
8. Although the literature has underlined the impact of green innovation on environmental
performance (Carrion-Flores and Innes, 2010), but it did not account for the link between board
capital, green innovation, and firm’s environmental performance.

Research Gap and Significance of the Study Continues…
Significance of the Study
1. Understanding the association between board capital and firm strategic decisions helps in building strong boards that
focus on long-term rather than short organization success. As board capital focuses on the intrinsic abilities of the board
members (Åberg and Torchia, 2020), it will mitigate the inefficiencies prevalent in the board rooms.
2. The present study emphasizes the importance of board’s human and social capital for proactive environmental
strategies, by providing a comprehensive mechanism through which corporate governance contributes towards the
firm’s environmental performance.
3. The current study underlines the fact that by impacting green innovation and environmental performance, board capital
facilitates firms to not only satisfy legitimacy but also stakeholder requirements in terms of environment.
4. The current study is also consistent with research highlighting board diversity for green innovation (Galia et al., 2015; He
and Jiang, 2019) because directors having more education, experience, and external links inherently carry diversity.
5. The study has significance in the Chinese context. Chinese listed companies are considered to have independent
directors who are independent in name only and they do not play a significant monitoring role in China (Farag and
Mallin, 2017; Li and Naughton, 2007). The responsibilities for misconduct are severe for insiders as compared to outside
directors (Cai, 2017). The state is the majority controller in most of the firms. According to Cai (2017), “ it is very difficult
for independent directors to effectively monitor the company’s controlling shareholders who nominate and elect them,
particularly within the unique Chinese social context”. The role of supervisory directors as effective monitors in China is
compromised too (Clarke, 2006). Institutional investors in China on average hold stocks for two months, thus having
short-term horizons (Jiang and Kim, 2015). In this vein, board capital (as an alternative governance mechanism) can
mitigate the governance problems in China.

Literature review
and Hypothesis
Development

HYPOTHESIS OVERVIEW
1. Board Capital and Green Innovation
H1a: Board human capital positively impacts green innovation in China.
H1b: Board social capital positively impacts green innovation in China.
H1c: Overall board capital positively impacts green innovation in China.
2. Absorptive Capacity, Board Capital and Green Innovation
H2a: Absorption capacity mediates the positive relationship between board human capital and green innovation in China.
H2b: Absorption capacity mediates the positive relationship between board social capital and green innovation in China.
H2c: Absorption capacity mediates the positive relationship between board capital and green innovation in China.
3. External Governance, Board Capital and Green Innovation
H3a: Audit quality positively moderates the relationship between board human capital and green innovation in China.
H3b: Audit quality positively moderates the relationship between board social capital and green innovation in China.
H3c: Audit quality positively moderates the relationship between board capital and green innovation in China.
H4a: Imitative pressure positively moderates the relationship between board human capital and green innovation in China.
H4b: Imitative pressure positively moderates the positive relationship between board social capital and green innovation in China.
H4c: Imitative pressure positively moderates the positive relationship between board capital and green innovation in China.
H5a: Media converge positively moderates the positive relationship between board human capital and green innovation in China.
H5b: Media coverage positively moderates the relationship between board social capital and green innovation in China.
H5c: Media coverage positively moderates the relationship between board capital and green innovation in China.
4. Board Capital , Green Innovation and Environmental Performance
6: Human and social capital of the board have a positive impact on Chinese Firm’s environmental Performance.
7: Green innovation has a positive impact on the environmental performance of firms in China.
8: Green Innovation mediates board capital-Environmental Performance relationship in China.

LITERATURE REVIEW AND HYPOTHESIS DEVELOPMENT
Green Innovation
Green innovation refers to the generation of new ideas, goods, services, processes, and management systems to minimize
wastage, global warming, water use, air pollution, and the use of coal, oil, and electricity in an effort to promote the conservation of
energy (Kraus et al., 2020; Rennings, 2000).
It is considered a critical strategic tool to gain sustainable competitive advantage (Chang, 2011; Chiou et al., 2011) and to comply
with environmental goals (Frondel et al., 2008; Singh et al., 2020).
It not only minimizes pollution (Carrion-Flores and Innes, 2010; Feng et al., 2018; Li et al., 2021) but also have the potential to
affect the whole process of organizational innovation (Aghion et al., 2016).
It is different from corporate innovation because there is a “pecking order” of innovation, whereby poor corporate governance
affects green innovation first, followed by corporate innovation (Daniele and Bennedsen, 2016).
Green innovation is riskier, involves more investment, and its return on investment (ROI) is long-term as compared to general
innovation (Adams et al., 2016).
Firms are facing an ever-increasing stakeholder pressure to be more environmentally responsible (Kock et al., 2012; Rodríguez-
fernández et al., 2020) and green innovation is a way forward (Daniele and Bennedsen, 2016).
While there is a wide consensus on the value of green innovations, it is essential to know what drives green innovation and why
some firms are more environmentally innovative than others.
The antecedents of green innovation are normally categorized into contextual factors such as regulations, social norms, and
stakeholder pressures (Fan, Lian, et al., 2020; Liu et al., 2020; Rennings and Rammer, 2011; Walton et al., 1998; Zhang et al.,
2019), firm‐level aspects (Dechezleprêtre et al., 2020; Huang and Li, 2017; Lin et al., 2019; Pan and Chen, 2019; Ros and
Kunapatarawong, 2019), internal factors (Awan et al., 2021; Bansal and Roth, 2000; He and Jiang, 2019; Usman et al., 2020).

Board Capital
Hillman and Dalziel (2003), using agency and resource dependence views, coined the term board capital to capture the
aspects of board’s education, expertise, and outside relationships.
In contrast to numerous studies which focus on a single role of the board (Ararat et al., 2015; Cornelli et al., 2013; Croci,
2018; Farag and Mallin, 2017; Liu et al., 2015), board capital extends to both, monitoring and resource provision/advice
roles of the board (Hillman and Dalziel, 2003; Maere et al., 2014).
Board capital comprised of board’s human and social capital; where human capital represents the education, and
experience/expertise; while social capital depicts outside network ties with different stakeholders (Chen, 2014; Hillman
and Dalziel, 2003; Ooi et al., 2015; Ramón-llorens et al., 2019).
The extant literature explains how different board attributes, e.g. independence, duality, diversity, internationalization, and
board ownership, etc. affect green innovation (Dong et al., 2019; Galia et al., 2015; He and Jiang, 2019; Naciti, 2019;
Usman et al., 2020; Walls and Berrone, 2017; Zhang, Ren, et al., 2020). However, these attributes are mostly structural
in nature and do not deeply capture the board’s ability to perform (Khanna et al., 2014) . Nevertheless, performance is a
function of ability and willingness, and performance targets cannot be achieved if the individual does not have the ability
to perform (Hunter and Hunter, 1984).
Moreover, despite of the fact that there is a shift in research focus from merely investigating independent vs. non-independent
directors to examining human and social capital of the board of directors (García-villaverde et al., 2021; Ramón-llorens et al.,
2019); board capital, being one of those attributes associated with board ability, needs an in-depth investigation in terms of
organizational outcomes, especially in different country contexts.

Board Capital and Green Innovation
As green innovation has long-term implications, its strategy is mostly prepared at the top level (He and Jiang, 2019). Roy
and Khastagir (2016) argued that green innovation culture emanates from the top.
Different authors have mentioned the role of boards in shaping greener culture at the organizational level (Hao and Fan,
2019; He et al., 2021; He and Jiang, 2019; Naciti, 2019; Usman et al., 2020). In particular, boards are increasingly being
called upon to contribute towards strategic advice, long-term planning (Fernandez et al., 2019), and green innovation
(Hao and Fan, 2019; Naciti, 2019).
Board capital enhances both monitoring and resource provision functions of the board (Hillman and Dalziel, 2003).
These functions are performed through board’s human and social capital (Haynes and Hillman, 2010).
The extant literature explains how different board attributes, e.g. independence, duality, diversity, internationalization, and
board ownership, etc. affect green innovation (Dong et al., 2019; Galia et al., 2015; He and Jiang, 2019; Naciti, 2019;
Usman et al., 2020; Walls and Berrone, 2017; Zhang, Ren, et al., 2020).
However, these attributes are mostly structural in nature and do not deeply capture the board’s ability to perform
Since green innovation is a strategic decision and extant literature shows that board capital positively impacts strategic
decisions (Chen, 2014; Fernandez et al., 2019; Ramón-llorens et al., 2019), the study argues that an enhanced board
capital positively impacts green innovation.

The context of China in Board Capital-Green Innovation relationship
China is committed to cut a major chunk of its carbon dioxide emissions per unit of GDP by 2030 (Zhang, Zeng, et al., 2020). This dire situation
demands an improved understanding of how to build greener organizations in China.
In terms of corporate governance, the empirical findings do not support the notion that board independence mitigate corporate governance problems
in China (Farag and Mallin, 2017; Bin Khidmat et al., 2020; Liao et al., 2018; Liu et al., 2014).
Institutional investors in China have shorter time horizons and they prefer short-term benefits over long-run sustainable growth (Jiang and Kim, 2015).
Governments in China normally possess considerable control over SOEs, including the right to nominate, appoint and review directors (Li and Xu, 2018;
Wang et al., 2015) and there are political agendas that damage the firm value in Chinese firms (Wei et al., 2005).
Li (2010) pointed out that China lacks an effective legal environment or effective governance mechanism to protect investor and minority shareholders.
The study argue that directors with higher board capital (as an alternative corporate governance mechanism) provide necessary education, skills, and
external links for better monitoring and resource provision and consequently have a positive effect on green innovation. Therefore:
H1a: Board human capital positively impacts green innovation in China.
H1b: Board social capital positively impacts green innovation in China.
H1c: Overall board capital positively impacts green innovation in China.

Absorptive capacity, board capital and green innovation
Apart from examining the board capital-green innovation relationship, it is also critical to identify the
mechanism through which board capital works to influence green innovation.
Green innovation involves enormous external information and its success depends on the firm’s ability to
utilize this external information (Peeters et al., 2014).
Absorptive capacity, which is the firm’s ability to adapt to rapidly changing external information (Cohen and
Levinthal, 1990), facilitates the integration of external knowledge (Qi et al., 2021).
An enhanced Board capital improves board’s monitoring and advisory roles, which consequently improves
firm’s ability to adapt to external information, that means it enhances absorptive capacity.
The higher absorptive capacity consequently has a positive impact on green innovation (Kostopoulos et al.,
2011).
Thus the study argue that absorptive capacity mediates the relationship between board capital and green
innovation.
H2a: Absorption capacity mediates the positive relationship between board human capital and green innovation in China.
H2b: Absorption capacity mediates the positive relationship between board social capital and green innovation in China.
H2c: Absorption capacity mediates the positive relationship between board capital and green innovation in China.

External governance, board capital and green innovation
 In economies, where internal governance mechanisms are still evolving, external governance can help mitigate corporate governance problems (Al-najjar
and Clark, 2017).
 Different researchers have used auditor quality (Chung et al., 2005; Hope et al., 2012), imitative pressure (Qi et al., 2021), and media coverage (Dang et
al., 2020) as external governance mechanisms . In line with Hillman and Dalziel (2003), the current study argues that external governance positively
moderates the relationship between board capital and green innovation.
 Quality auditors push management and boards to remain aligned to shareholders’ interests(Al-matari et al., 2016). The current study argues that audit
quality moderates the impact of board capital on green innovation.
 Firms will actively attempt to reduce the level of uncertainty in their organizational environment by imitating the structures and activities of similar firms
(DiMaggio and Powell, 1983). The study argues that when imitative pressure increases, boards with augmented board capital provide more requisite
resources and monitoring to mimic the industry leaders in green innovation. Therefore, imitative pressure positively moderates the impact of board capital
on green innovation.
 Media coverage refers to the coverage intensity from the media on the firm (Byun and Oh, 2018). The media can play an important role in mobilizing
social movements such as environmental interest groups (Bansal, 2005). The media not only plays a passive role in shaping institutional norms but also a
more active one by choosing the stories worth reporting and framing them to reflect editorial values. Empirical studies have shown that the media has
been particularly influential on corporate environmental responses (Bansal and Roth, 2000; Dang et al., 2020; Fan, Yang, et al., 2020; Huang et al.,
2021). The total amount of media coverage raises the firm’s visibility, inviting further public attention and scrutiny. The threat of negative media publicity
can apply coercive pressure to firm’s board to commit to sustainable development. In this vein, boards have to act prudently towards environmental-
friendly green innovation technologies. Thus, the study argues that media coverage positively moderates the impact of board capital on green innovation.

LITERATURE REVIEW AND HYPOTHESIS DEVELOPMENT CONTINUES….
External governance, board capital and green innovation
Therefore:
H3a: Audit quality positively moderates the relationship between board human capital and green innovation in China.
H3b: Audit quality positively moderates the relationship between board social capital and green innovation in China.
H3c: Audit quality positively moderates the relationship between board capital and green innovation in China.
H4a: Imitative pressure positively moderates the relationship between board human capital and green innovation in China.
H4b: Imitative pressure positively moderates the positive relationship between board social capital and green innovation in China.
H4c: Imitative pressure positively moderates the positive relationship between board capital and green innovation in China.
H5a: Media coverage positively moderates the positive relationship between board human capital and green innovation in China.
H5b: Media coverage positively moderates the relationship between board social capital and green innovation in China.
H5c: Media coverage positively moderates the relationship between board capital and green innovation in China.

LITERATURE REVIEW AND HYPOTHESIS DEVELOPMENT CONTINUES….
Board capital, green innovation and environmental performance
 Environmental performance has become an important corporate issue (Kassinis and Vafeas, 2006) and there is a
consistent stakeholders pressure to implement environmental initiatives (El-kassar and Singh, 2019; Singh et al., 2020;
Yu et al., 2017). The extant literature has found that financial and environmental performances go side by side (Barnett
and Salomon, 2006; King and Lenox, 2002; Russo and Fouts, 1997; Xie et al., 2016).
 As board is an important top decision-making body, board attributes impact environmental performance (Dragomir, 2013;
De Villiers et al., 2011). Boards high in social and human capital are better able to provide quality advice on various
environmental and other CSR strategies (Ramón-llorens et al., 2019; Walls and Hoffman, 2013).
 A higher green innovation performance enhances a firm’s environmental performance (Li et al., 2016; Roy and
Khastagir, 2016; Zailani et al., 2014).
 The current study argues that board capital has a direct and positive impact on environmental performance and it also
indirectly impacts environmental performance through the mediation of green innovation. Therefore:
6: Human and social capital of the board have a positive impact on Chinese Firm’s environmental Performance.
7: Green innovation has a positive impact on the environmental performance of firms in China.
8: Green Innovation mediates board capital-Environmental Performance relationship in China.

SAMPLE AND DATA COLLECTION
The study selected a sample of non-financial A-listed Chinese firms during 2010 to 2018, listed on the Shanghai and
Shenzhen stock exchanges.
The listed companies commonly go through rigorous public scrutiny as compared to non-listed companies, need more
corporate governance mechanisms and may have more urge to invest in green innovations (He and Jiang, 2019).
This period is chosen keeping in mind major regulatory and economic reforms took place in China before 2010. i.e. WTO
membership, IFRS adoption, non-tradable shares reforms. Besides, data related to environmental performance was not
available before 2010.
Financial companies are not included as they operate under a strict set of regulations and have different disclosure
requirements (Haniffa and Cooke, 2005).
Special treatment firms which are considered financially distressed in china are also excluded considering their unique
regularity requirements (Ullah et al., 2020).
The financial and corporate governance data is collected from CSMAR database.
Green patent data is collected from the China National Intellectual Property Administration (CHIPA).
Data on environmental regulation (a control variable) is collected from the regional environmental statistical yearbook.
The data on environmental performance is collected from the HEXUN database.

MEASUREMENT OF VARIABLES
Green Innovation
The study uses green patents data to measure green innovation. Green patent data have been used as a measure of green innovation in
prior research studies (i.e. Huang et al., 2021; Johnstone et al., 2012; Li, Zhao, et al., 2018; Qi et al., 2021). The study uses natural
logarithm of green patents plus one for calculating the green innovation of firms (Huang et al., 2021)
Board Capital
Following prior work (Chen, 2014; Hillman and Dalziel, 2003; Ooi et al., 2015), the study defines board capital as a combination of human
capital and social capital; whereby human capital is the education and experience of the board members (Chen, 2014; Kroll et al., 2007;
Ooi et al., 2015), while social capital includes concurrent directorships (Tian et al., 2011).
In the human capital measurement, educational part is measured by summing up the number of educations years of board and dividing it
by board size (Chen, 2014). boards experience is calculated by adding the number of directors with prior professional experience in
accounting, economics, engineering, research, and law and dividing it by board size (Lai et al., 2019; Ooi et al., 2015; Ortiz-de-
mandojana et al., 2012; Rossoni and Gonçalves, 2019).
Social capital is calculated by summing the concurrent positions of board members and dividing it by board size (Chen, 2014; Rossoni
and Gonçalves, 2019). Log transformations of both human capital and social capital are used in the regression analysis.
Absorptive Capacity
Prior research used R&D expenditures (Cohen and Levinthal, 1990; Tsai, 2001), number of employees working in the R&D department
(Qi et al., 2021), number of employees with a college education (Grimpe and Sofka, 2009), investment in scientific and technical training
(Mowery and Oxley, 1995, or qualitative measures (Lichtenthaler, 2009) as proxies of absorptive capacity.
The current study uses log transformation of R&D expenditure, as a proxy of absorptive capacity (Grimpe and Sofka, 2009; Tsai, 2001;
Volberda et al., 2010).

MEASUREMENT OF VARIABLES
Environmental Performance
We used CSR ratings on environmental performance from the HEXUN Chinese database to measure
environmental performance (Shahab et al., 2019; Yang et al., 2019). The use of environmental ratings as a proxy
for environmental performance has been frequently used in extant research (García Martín and Herrero, 2020;
De Villiers et al., 2011).
Audit Quality
Big4 audit firms are used as a proxy of audit quality. For robustness, auditors with overseas experience will be
used (Al-matari et al., 2016; Nguyen et al., 2020) .
Imitative pressure
It is the peer pressure from industry. It is calculated by taking the log of number of green patents in the industry
where a particular company is operating in a particular year (Qi et al., 2021).
Media coverage
It is calculated by total number of media reports issued on the company by media during a year (Cai et al., 2020;
Huang et al., 2021).

RESEARCH METHODS
Statistical Analysis
Due to its wider acceptability, the study conducts statistical analysis using the ordinary least squares (OLS) technique (Jermias and Gani,
2014; Martin et al., 2015).
The study uses Variance inflation factor (VIF) for each variable to indicate the stability of the regression model. The variables with VIF value
of less than 10 will be included only.
In all regressions, we use industry and year dummies to control for unobservable differences among industries and changes in the business
cycle, respectively (Martin et al., 2015).
We use extensive control variables to capture the variation between firms that could affect optimal governance structure (Black, Jang, &
Kim, 2006).
Robustness Tests
Proxies for Independent variables
According to Hillman and Dalziel (2003), board size can be used as a proxy of board capital. As a robustness test, the study will employ
board size as the independent variable proxy.
Proxies for control variables
The study uses different proxies of firm size, profitability, leverage, and ownership concentration and re-run the regression for robustness.
Alternative measure of green innovation
Based on Huang et al. (2021), the study re-estimated the models using the green innovation dummy as an alternative measure of green innovation. The green
innovation is a dummy variable that equals 1 if a company has at least one green patent and 0 otherwise. Based on He and Jiang (2019), ISO-14001 certification is
employed as a second alternate measure of green innovation.
Lagged independent variable values
Prior studies used lagged independent variables to confirm that board members must be in their roles for some time to have an impact on organizational outcomes
(Bear et al., 2010) and to avoid endogeneity (Cenciarelli et al., 2018). The current study will employ lagged independent variables to add robustness.

RESEARCH METHODS
Robustness Tests
Alternative estimation methods
Since the dependent variable green patent applications are count data, defined as a non-negative integer, the study will use Poisson and
negative binomial regression models to examine the robustness of results (Berrone et al., 2013; Valencia, 2018).
Endogeneity problem
The study will use Fixed effect regression and two-step Generalized method of moments (GMM) to account for endogeneity issues.
Further, the propensity score matching (PSM) technique will be employed to account for sample selection bias (Huang et al., 2021).
Sample split option
To confirm that the estimated relationships are stable, we change the sample range by eliminating less environmentally impacting
industries ( i.e. real estate, retail, wholesale, etc.) from our sample and re-run the analysis for our hypothesis.
Result confirmation by linking green innovation to firm value
The study will employ channel analysis to check the validity of our green innovation measure by empirically examining the association
between green innovation and firm value using Tobin’s Q as a proxy.

INNOVATION POINTS
• This study provides several theoretical, empirical, and methodological contributions (innovations) to the corporate governance,
green innovation, and firm’s environmental performance literature which are mainly divided into five parts as follows:
1. Board capital and Green Innovation
a) To the best knowledge of the researcher, this is the first empirical research to analyze the effect of board capital (a corporate governance aspect)
on the strategically critical decision of green innovation. Although some studies have explored the role of board capital (Chen, 2014; Chiu et al.,
2019; Dowell et al., 2011; Haynes and Hillman, 2010; Hillman, 2005; Hillman and Dalziel, 2003), researchers overlooked its effect on green
innovation.
b) Baranchuk and Dybvig (2009) highlighted that board attributes encompass multiple dimensions related to board members’ motives, preferences,
and access to information and suggested that the combined effect of different facets of a board attribute is more important for board functioning,
as compared to individual aspects. However, most of the studies on board capital have examined the impact of dimensions of board capital
separately. This study not only examined the individual board capital facets of board human and social capital but also overall board capital’s
impact on green innovation which differentiates it from other studies.
c) Numerous studies have examined the impact of board capital on organizational outcomes in developed economies (Chen, 2014; Maere et al.,
2014; Ramón-llorens et al., 2019). However very scant research has been done in developing economies (Ooi et al., 2015). Given that the
Chinese market has a unique financial structure characterized by state ownership in most of the companies, high managerial appropriations,
compromised board independence, shorter horizon of institutional investment (Jiang and Kim, 2015), and an evolving corporate governance
system (Jiang and Kim, 2020). Board capital (as an alternative mechanism) may overcome the shortcomings of this weak governance in China.
Thus, to the best knowledge of the researcher, this empirical research is unique in that it analyzes the impact of board capital as an alternative
corporate governance mechanism in the Chinese context.
d) Green innovation has gathered global attention in recent times (He et al., 2021; Takalo et al., 2021). There have been calls to know what drives
green innovation and why some firms are more environmentally innovative than others (He and Jiang, 2019; Marquis et al., 2015). The current
study contributes towards green innovation literature by explicitly highlighting the antecedents (such as board capital and absorptive capacity) and
consequences (environmental performance) of green innovation.

INNOVATION POINTS
2. Absorptive capacity, Board capital and Green Innovation
The current dissertation is the first empirical research that exclusively examines the impact of board capital on green innovation through the
mechanism of absorptive capacity. Extant literature, although underlined the absorptive capacity in terms of green innovation (Ali and Park,
2016; Qi et al., 2021; Zhang et al., 2019), failed to explore the mediating role of absorptive capacity on the relationship between corporate
governance mechanisms and green innovation.
3. External Governance, board capital, and green innovation
To the best of researcher’s knowledge, this is the first empirical research to analyze the moderating role of external governance mechanisms
i.e. audit quality, imitative pressure, and media coverage, on the relationship between board capital and green innovation. Investigating the
moderating effect of external governance in the board capital-green innovation relationship is something that was completely neglected by the
previous studies and has not yet been examined by ancestors.
a) The literature has provided enough evidence that audit quality shapes strategic directions (Abid et al., 2018; Samudhram et al., 2014) and
moderates corporate governance attributes (Al-matari et al., 2016), yet it is unable to answer whether it moderates the impact of board
capital on green innovation. The current study is unique in that, it analyzes how audit quality moderates the impact of board capital on
green innovation.
b) Imitative pressure primarily emanates from firms’ peers and increased acceptance of green innovation by peers compel firms and boards to
follow the same green innovation practices (Carter and Rogers, 2008). The current dissertation is the first study to explore the moderating
effect of imitative pressure (as an external governance mechanism) on the impact of board capital on green innovation.
c) Media, being an important feature of the external governance, has played an increasingly important role in the capital market and is
regarded as an important oversight mechanism that effectively replaces the deficiencies of institutional protection (Dyck et al., 2008). Board
members consider the media reports when formulating different environmental policies (Rupley et al., 2012). Campbell (2007) argued that
media plays a central role in monitoring and reporting enterprise behavior, which constantly threatens corporations with public exposure.
The current dissertation is the first study to explore the moderating effect of media coverage on the impact of board capital on green
innovation.

INNOVATION POINTS
4. Environmental performance, board capital, and green innovation
 To the best knowledge of the researcher, this is the first empirical research to examine the association between board capital, green
innovation, and the firm’s environmental performance by investigating the mediating role of green innovation in the board capital-
environmental performance relationship.
 Green innovation has a major impact on reducing the environmental burden in terms of pollution reduction, less greenhouse gas
emissions, energy-saving, and waste recycling (Chang, 2011; Lin and Ho, 2008; OECD, 2013), thereby numerous researchers have
found a positive effect of green innovation on firm’s environmental performance (Kraus et al., 2020; Rehman et al., 2021; Yu et al.,
2017; Zailani et al., 2014).
 Similarly, Board attributes have a positive link with environmental performance (Hussain and Rigoni, 2018; Naciti, 2019; Walls et al.,
2012). However, the mediating effect of green innovation towards board capital-environmental performance has been overlooked in
the literature.
5. Methodological contributions
a) Prior studies (Huang et al., 2021; Qi et al., 2021; Ramón-llorens et al., 2019) are based on relatively shorter periods (short panel
dataset), which is a limitation in providing a clear view of the trends of board capital and green innovation over time, while this
empirical study uses the dataset of nine years.
b) Lastly, the study employs several robustness tests to validate findings i.e. it uses two proxies of the dependent variable and
different proxies of control and independent variables. The study changed the sample range by eliminating the less
environmentally impacting industries to confirm that results are stable. It employed different statistical methods for robustness and
endogeneity issues prevalent in corporate governance studies. It uses a relatively larger set of control variables.

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