Environmental, social and governance (ESG) disclosure and firm performance: does national culture matter?
ISSN: 2049-372X
Article publication date: 14 June 2022
Issue publication date: 13 October 2023
Abstract
Purpose
The purpose of this study is to analyze the extent to which culture may affect the relationship between environmental, social and governance disclosure (ESGD) and firm performance (FP).
Design/methodology/approach
Data for testing the hypotheses are collected from 668 firms in the energy sector worldwide over a period of eight years from 2009 to 2016. The analysis is carried out using the instrumental variables regression technique to account for endogeneity. Hofstede’s cultural dimensions of power distance (PD), masculinity (MASC), long-term orientation (LTO), uncertainty avoidance (UNCAVOID) and individualism (INDV) are used as proxies for culture.
Findings
The results show that ESGD has a significant negative impact on the profitability of energy firms. When cultural dimensions are taken into account, PD and LTO are found to significantly moderate the relationship between ESGD and FP, whereas MASC, UNCAVOID and INDV have no significant effect on the relationship between ESGD and FP.
Practical implications
The findings of this study highlight the need for regulators to consider the importance of cultural dimensions when seeking to develop a single global standard for ESGD. In addition, regulators need to weigh both the costs and benefits of developing a global standard for it to be effective and acceptable.
Social implications
This study emphasizes the need to take into account the cultural orientation of the society in which firms operate when devising strategies to fulfill societal expectations and achieve business goals.
Originality/value
To the best of the authors’ knowledge, this is the first study that addresses the role of culture in affecting the impact of ESGD on FP.
Keywords
Acknowledgements
The authors would like to sincerely thank the anonymous reviewers and the editors of the journal for their time and effort in reviewing the manuscript and in providing constructive feedback which have helped improve this manuscript.
Citation
Wasiuzzaman, S., Ibrahim, S.A. and Kawi, F. (2023), "Environmental, social and governance (ESG) disclosure and firm performance: does national culture matter?", Meditari Accountancy Research, Vol. 31 No. 5, pp. 1239-1265. https://doi.org/10.1108/MEDAR-06-2021-1356
Publisher
:Emerald Publishing Limited
Copyright © 2022, Emerald Publishing Limited