National Culture and the Value Implications of Corporate Environmental and Social Performance |
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| Institution: | 1. Sauder School of Business, University of British Columbia, Canada;2. Moore School of Business, University of South Carolina, United States of America;3. School of Management and Economics, Chinese University of Hong Kong - Shenzhen, China;1. Department of Finance and Economics, Mississippi State University College of Business, Post Office Box 9580, 312K McCool Hall, Mississippi State, MS 39762-9580, United States of America;2. Department of Finance, Banking & Insurance, Appalachian State University Walker College of Business, ASU Post Office Box 32058, 3065 Peacock Hall, Boone, NC 28608, United States of America;1. Henry B. Tippie College of Business, Department of Finance, University of Iowa, 108 Pappajohn Business Bldg., Iowa City, IA 52242-1994, United States of America;2. Peter T. Paul College of Business and Economics, Department of Accounting and Finance, University of New Hampshire, 10 Garrison Avenue, Durham, NH 03824-2325, United States of America;1. Wells Fargo Asset Management, United States of America;2. Saint Louis University, United States of America;3. University of Nevada, Reno, United States of America;1. Saint Mary''s University, Halifax, NS B3H 3C3, Canada;2. University of Alberta, Edmonton, AB T6C 4G9, Canada |
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| Abstract: | We examine why environmental and social (E/S) performance vary across countries and firms, and evaluate the value implications. Using a sample of 33,021 firm-year observations representing 4587 firms from 43 countries over the 2003–2015 period and applying hierarchical linear modeling, we find that individualism is positively associated with firm-level E/S performance. We show that two country-level channels—freedom of the press and protection of equal rights—and three firm-level channels—managerial discretion, board diversity, and corporate transparency—link individualism to E/S performance. We find a positive association between firm-level E/S performance and firm value, with three firm-level channels—cash flows, cash flow variability, and cost of equity—linking E/S performance to firm value. This positive association is stronger in more individualistic countries. Finally, we find that internationalization weakens the role of national culture; however, it accentuates the positive association between firm-level E/S performance and firm value. |
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