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Regional cultural inclusiveness and firm performance in China

Author

Listed:
  • Lina Mao

    (Communication University of Zhejiang)

  • Guangfan Sun

    (Renmin University of China)

  • Yining He

    (Zhejiang Shuren University)

  • Shanshan Zheng

    (Capital University of Economics and Business)

  • Changwei Guo

    (Renmin University of China)

Abstract

As society continues to develop, a growing body of research is focusing on how informal institutions, such as culture, influence corporate behavior and economic outcomes. The aim of this study is to explore the impact of cultural inclusiveness, as a non-formal institution, on firm performance. Using Chinese A-share listed firms as our sample, we employ econometric methods to analyze the relationship between cultural inclusiveness and firm performance. Our findings reveal that cultural inclusiveness enhances firm performance, particularly evident in regions with higher levels of cultural inclusiveness, where firms tend to exhibit higher return on equity. To address concerns of endogeneity, instrumental variable regression using regional topographical changes is employed. Mechanism testing indicates that cultural inclusiveness primarily improves firm performance by reducing financial constraints and optimizing employee structure. Additionally, the study finds that cultural inclusiveness has a more pronounced impact on firms with higher corporate social responsibility (CSR) performance as well as those with greater investment in research and development (R&D). This study provides a comprehensive empirical explanation of how cultural inclusiveness influences the sustainable operation of businesses.

Suggested Citation

  • Lina Mao & Guangfan Sun & Yining He & Shanshan Zheng & Changwei Guo, 2024. "Regional cultural inclusiveness and firm performance in China," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-14, December.
    • Handle: RePEc:pal:palcom:v:11:y:2024:i:1:d:10.1057_s41599-024-03505-4
    DOI: 10.1057/s41599-024-03505-4
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