Every coin has two sides: public sustainability mindset and corporate financial misconduct

Chenyong Liu

Meditari Accountancy Research, 2025, vol. 33, issue 3, 823-852

Abstract: PurposeAlthough existing literature has highlighted the benefits of sustainability practices for business, few studies explore their potential downside. To address this gap, this study aims to examine the relationship between public sustainability mindset and financial misconduct in local firms.Design/methodology/approachBased on survey results from International City/County Management Association, the author aggregates data on public sustainability mindset at the metropolitan statistical area (MSA) level in the USA. The author uses linear regression analysis to investigate the hypotheses. Robustness tests are also performed using approaches such as propensity score matching, two-stage least squares, falsification test and alternative measure of sustainability mindset.FindingsThis study finds that in MSAs with a stronger public sustainability mindset, local firms are more likely to engage in financial misconduct. Moreover, this association is mitigated by the availability of employment opportunities in the area, indicating that job security concerns have a moderating effect. Additional test suggests that firms with more integrity culture are less likely to engage in financial misconduct, even in areas where residents have a strong sustainability mindset.Originality/valueThis paper could be of interest to both policymakers and managers as it illustrates an unexpected impact of public sustainability awareness on financial compliance issues. It also provides cautions when prompting sustainability mindset among the public and suggests potential solutions to address the problem.

Keywords: Sustainability; Financial misconduct; Integrity culture (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eme:medarp:medar-03-2024-2421

DOI: 10.1108/MEDAR-03-2024-2421

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