National culture and the valueto implications of corporate environmental and social performance

Dale Griffin, Omrane Guedhami, Kai Li and Guangli Lu

Journal of Corporate Finance, 2021, vol. 71, issue C

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.

Keywords: Individualism; National culture; Environmental performance; Social performance; Firm value; Internationalization; Hierarchical linear model (search for similar items in EconPapers)
JEL-codes: G18 G31 G32 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:71:y:2021:i:c:s0929119921002455

DOI: 10.1016/j.jcorpfin.2021.102123

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