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

Author

Listed:
  • 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)

  • Yonggang Tian

    (Business School, Hunan University, Changsha 410012, China
    Research Institute of Digital Society and Blockchain, Hunan University, Changsha 410082, China)

  • Yi-Shuai Ren

    (Research Institute of Digital Society and Blockchain, Hunan University, Changsha 410082, China
    School of Public Administration, Hunan University, Changsha 410082, China
    Centre for Resource and Environmental Management, Hunan University, Changsha 410082, China
    The Energy Centre, University of Auckland, Auckland 1010, New Zealand)

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.

Suggested Citation

  • Panpan Fu & Seema Wati Narayan & Olaf Weber & Yonggang Tian & Yi-Shuai Ren, 2022. "Does Local Confucian Culture Affect Corporate Environmental, Social, and Governance Ratings? Evidence from China," Sustainability, MDPI, vol. 14(24), pages 1-18, December.
    • Handle: RePEc:gam:jsusta:v:14:y:2022:i:24:p:16374-:d:996401
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    References listed on IDEAS

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