Abstract
ESG has become an important topic among corporate managers and the investment community. This article hypothesizes that private firms tend to have a lower ESG performance than public firms because of capital resource constraints, and US firms tend to have a lower ESG performance than non-US firms because of institutional structures that focus on the shareholder primacy. However, since ESG engagement can create sustained competitive advantages for US private firms that operate under shareholder-centric structures, US private firms may have higher ESG performance than public firms and non-US private firms. Using a sample of 6,073 firms across 34 countries from 2009 to 2017, we found that private firms have lower ESG than public firms. We found that US public firms have lower ESG than non-US public firms, while US private firms have better ESG compared to US public firms and non-US private firms. Hence, the investment community should consider investing in US private firms that have superior ESG performance.
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