Does Local Confucian Culture Affect Corporate Environmental, Social, and Governance Ratings? Evidence from China

Panpan Fu, Seema Wati Narayan, Olaf Weber, Yonggang Tian and Yi-Shuai Ren ()
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Panpan Fu: College of Finance & Statistics, Hunan University, Changsha 410006, China
Seema Wati Narayan: Asia Pacific Applied Economics Association, Melbourne 3000, Australia
Olaf Weber: Faculty of Environment, School of Environment, Enterprise and Development (SEED), University of Waterloo, 200 University Avenue West, Waterloo, ON N2L 3G1, Canada
Yi-Shuai Ren: Research Institute of Digital Society and Blockchain, Hunan University, Changsha 410082, China

Sustainability, 2022, vol. 14, issue 24, 1-18

Abstract: We investigate the influence of local Confucian culture on firms’ commitment to environment, social, and governance (ESG). We hypothesize that local Confucian culture will encourage firms to increase their commitment and effort to ESG practices, as a basic idea of Confucianism is akin to the golden rule, which dictates that one must treat people fairly and well if one wishes to be treated the same manner. Using geographic distances to local Confucian temples and centers to create geographic proximity-based measures of local Confucian culture, we confirm that local Confucian culture in the vicinity of corporate headquarters is positively associated with firms’ ESG performance. Further, we hypothesize and find that the role of local Confucian culture is more prominent in state-owned firms, larger firms, firms with greater media coverage and analyst following, and in more recent years, when environmental, social, and governance practices are more relevant and receive greater attention. Our research shed light on studies evaluating the influence of local cultural norms on investment decisions within the framework of ESG.

Keywords: Confucian culture; ESG; China; media; analyst; SOE (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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