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The effect of corruption exposure on the ESG performance of multinational firms11We greatly appreciate the valuable feedback from the editor Hui Guo. John Fan Zhang is an assistant professor and Jacky Yuk-chow So is the Chair Professor, both authors are at the Macau University of Science and Technology. We also deeply appreciate helpful discussions with and suggestions from Ku He, Domingo Ribeiro-Soriano, Chi-Yang Tsou, K. C. John Wei, Shuya Xue, Lisheng Yu, Qianjin Zhang, and seminar participants at the 5th CCGAR Research Camp on Auditing and Accounting, and the 2022 International Conference on Climate and Energy Finance (ICEF), the 2023 CFRI&CIRF Joint Conference, and the 17th NYCU International Finance Conference & 3rd Yushan Conference. This paper is awarded as the best paper at the 2022 ICEF conference. The paper was circulated with the title “Local corruption: A cultural explanation of corporate social responsibility of multinational firms”. This paper is supported by the Macau University of Science and Technology Foundation, funding number: FRG-23-040-MSB. All errors are the authors' responsibility

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  • Zhang, John Fan
  • So, Jacky Yuk-chow

Abstract

In this paper, we study how exposure to local corruption cultures affects the environmental, social, and corporate governance (ESG) performance of multinational firms. The results show that corruption exposure is negatively related to all three ESG dimensions. This result is robust after considering the interaction between corruption exposure and government quality, with alternative control variables, and with different measures of internationalization. Further, after we examine the interaction between internationalization and corruption exposure, the effect of corruption exposure remains significant. However, the effect of internationalization becomes insignificant. These results indicate that country exposures, such as corruption culture, that underlying internationalization are more important for the ESG performance of multinational companies.

Suggested Citation

  • Zhang, John Fan & So, Jacky Yuk-chow, 2024. "The effect of corruption exposure on the ESG performance of multinational firms11We greatly appreciate the valuable feedback from the editor Hui Guo. John Fan Zhang is an assistant professor and Jacky," Pacific-Basin Finance Journal, Elsevier, vol. 86(C).
    • Handle: RePEc:eee:pacfin:v:86:y:2024:i:c:s0927538x24001847
    DOI: 10.1016/j.pacfin.2024.102433
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    More about this item

    Keywords

    Corruption; Social responsibility; Multinational firms; Globalization; Culture;
    All these keywords.

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F64 - International Economics - - Economic Impacts of Globalization - - - Environment
    • Z19 - Other Special Topics - - Cultural Economics - - - Other

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