National Culture and the Value Implications of Corporate Environmental and Social Performance

62 Pages Posted: 8 Oct 2018 Last revised: 21 Sep 2021

See all articles by Dale W. Griffin

Dale W. Griffin

University of British Columbia (UBC) - Division of Marketing

Omrane Guedhami

University of South Carolina - Moore School of Business

Kai Li

University of British Columbia (UBC) - Sauder School of Business; Asian Bureau of Finance and Economic Research (ABFER); China Academy of Financial Research (CAFR); European Corporate Governance Institute (ECGI); Canadian Sustainable Finance Network (CSFN)

Guangli Lu

University of British Columbia, Sauder School of Business

Date Written: September 21, 2021

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 4,587 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.

Keywords: individualism; national culture; environmental performance; social performance; firm value; internationalization; hierarchical linear model

JEL Classification: G18; G31; G32

Suggested Citation

Griffin, Dale W. and Guedhami, Omrane and Li, Kai and Lu, Guangli, National Culture and the Value Implications of Corporate Environmental and Social Performance (September 21, 2021). Available at SSRN: https://ssrn.com/abstract=3250222 or http://dx.doi.org/10.2139/ssrn.3250222

Dale W. Griffin

University of British Columbia (UBC) - Division of Marketing ( email )

Canada

Omrane Guedhami

University of South Carolina - Moore School of Business ( email )

Columbia, SC
United States

Kai Li (Contact Author)

University of British Columbia (UBC) - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada
604-822-8353 (Phone)
604-822-4695 (Fax)

HOME PAGE: http://https://sites.google.com/view/kaili/home

Asian Bureau of Finance and Economic Research (ABFER) ( email )

BIZ 2 Storey 4, 04-05
1 Business Link
Singapore, 117592
Singapore

China Academy of Financial Research (CAFR)

1954 Huashan Road
Shanghai P.R.China, 200030
China

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Canadian Sustainable Finance Network (CSFN) ( email )

Queens University
Kingston, ON
Canada

HOME PAGE: http://https://smith.queensu.ca/centres/isf/research/network.php

Guangli Lu

University of British Columbia, Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada
6045069229 (Phone)

HOME PAGE: http://sites.google.com/view/guanglilu

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