Moderation impact of national culture on international firm’s environmental, social, governance and financial performance

Abstract

We examine whether country-level national culture dimensions might moderate an international firm’s environmental, social, governance performance to strengthen or weaken its financial performance based on the Institutional Difference Hypothesis. We find that low power distance, high individualism, high masculinity, high uncertainty avoidance, long-term orientation, and indulgent national culture would moderate a firm’s environmental, social, governance performance to strengthen its financial performance further. On the contrary, high power distance, collectivism (low individualism), feminine, low uncertainty avoidance, short-term orientation, and restraint dimensions would be expected to weaken a firm’s financial performance by discouraging firms from undertaking superior environmental, social, governance performance. GLOBE’s findings such as low power distance, collectivistic institutional and in-group national culture, high uncertainty avoidance, future orientation, all report a significant positive moderation impact on a firm’s environmental, social, governance performance to strengthen its financial performance further. However, high gender-egalitarian national culture and high assertiveness would negatively moderate firm’s financial performance and environmental, social, governance performance. Overall, we think that our findings would further propagate the institutional difference hypothesis as we observe that each of our studied national culture dimensions would moderate firm’s environmental, social, governance performance and financial performance associations significantly.