Journal of Corporate Finance Vol. 71 2021
National Culture and the Value Implications of Corporate Environmental and Social Performance
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.
- DOI
- 10.1016/j.jcorpfin.2021.102123
- Volume
- 71
- Pages
- 102123
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref