Sustainability Performance, National Culture, and Corporate Financial Performance

Given the increasing global importance of sustainability performance and reporting, along with prior mixed results in the literature, we examine the impact of country-specific attributes on sustainability reporting. Specifically, we examine the impact of national culture and legal origin on sustainability performance and how national culture and legal origin affect the impact of sustainability performance on corporate financial performance. We use artificial-intelligence (AI)-based TruValue Labs Environmental, Social, and Governance (ESG) performance data based on the Sustainability Accounting Standards Board (SASB) ESG reporting framework as our measure of sustainability performance, with over 6000 observations from 52 countries providing generalizable and more robust results than prior studies. Our results support the idea that dimensions of national culture affect sustainability performance. We find mixed results for the impact of legal origin on sustainability performance, but that legal origin moderates the association between national culture and sustainability performance. We also find a weak positive association between sustainability performance and financial performance, and that national culture moderates this association. Using a robust new measure of sustainability performance applied to observations from a large number of countries, this paper provides generalizable new insights into the impact of national culture and legal origin on sustainability performance, as well as the association of sustainability performance with corporate financial performance, taking into account national culture and legal origin. Our study provides important insight for users of sustainability performance information and adds to the current international conversation about sustainability disclosure regulation. These findings provide a timely, robust look at sustainability performance as regulators and stakeholders of all types work to understand the drivers and impact of sustainability practices and disclosure.