How Confucianism Affects Corporate ESG Performance: Evidence from China

Abstract This study breaks the framework of previous studies of formal institutions and systematically examines the effect of Confucianism on corporate ESG performance from the perspective of informal institutions. Using Chinese listed companies as the research sample. The empirical results indicate that Confucianism has a significant positive effect on corporate ESG performance. In other words, the greater the influence of Confucianism on a company, the better its ESG performance. This improvement is achieved through two paths: mitigating managerial myopia and improving the quality of internal control. Furthermore, the heterogeneity analysis suggest that the impact of Confucianism on corporate ESG performance is more significant for non-state-owned firms. However, foreign culture shocks weaken the positive effect of Confucianism on corporate ESG performance. This paper contributes to research on the intersection of Confucianism and corporate finance, which has theoretical and practical implications for promoting cultural self-awareness and self-confidence, and advocating Confucianism as a guiding principle for companies.