The Power of Culture: Business Nationalist Culture and ESG Performance

Abstract

High-quality development is the theme of China’s economic and social development in the new era, and corporate ESG performance is a comprehensive indicator for evaluating the level of corporate environmental responsibility, social responsibility and governance, as well as an important yardstick for identifying the high-quality development of enterprises. This paper takes Chinese non-financial listed companies from 2011 to 2022 as the research sample and empirically examines the impact of corporate nationalism culture on corporate ESG performance and its mechanism by quantifying corporate nationalism culture using the text of corporate annual reports, natural language processing and text analysis methods. The results of the study show that corporate nationalism culture significantly enhances corporate ESG performance. The mechanism analysis suggests that corporate nationalism culture, as an internal informal system, can play a governance role and promote corporate ESG practices by changing attention allocation and mitigating agency problems. The positive effect of corporate nationalism culture on corporate ESG performance is more pronounced in the grouping of firms with lower institutional investor shareholding, fewer analysts’ attention and embedded party organisations. A heterogeneity analysis reveals that the corporate nationalism culture driving effect on corporate ESG performance is more significant in the subsample of firms with weak financing constraints, in the growth period and in the decline period. This study reveals the positive role of soft cultural factors in enhancing corporate ESG performance, providing useful managerial evidence for companies to integrate ESG concepts at the strategic level for high-quality economic development.

1. Introduction

In the report of the 20th Party Congress, it is explicitly stated that “high-quality development is the primary task of building a modern socialist country in all aspects”. Enterprises are the primary agents of economic development and indisputably the central subjects of high-quality development. ESG emphasises the comprehensive evaluation of enterprises’ performance in three dimensions: environmental protection, social responsibility and internal governance. The enhancement of ESG performance can assist enterprises in developing competitive advantages and achieving sustainable development. It is therefore of theoretical and practical significance to explore the factors that facilitate corporate ESG strategies. In this context, scholars have continued to study the various factors affecting ESG performance, with a particular focus on those that can enhance corporate ESG performance.

In this context, numerous studies have confirmed the positive impact of corporate environmental, social and governance (ESG) performance. It has been found that good ESG performance can benefit firms in a number of ways: most directly, good ESG performance significantly improves firms’ financial performance and helps to reduce firms’ market risk [1]. Firms with good ESG performance can gain a good reputation in the marketplace [2], reduce the firms’ cost of equity capital and cost of debt [3], alleviate corporate financing constraints [4], circumvent management self-interested behaviours [5], reduce inefficient investment behaviours [6], enhance firms’ innovation performance [7], promote firms to accelerate the green transformation process [8], improve enterprise total factor productivity [9] and other advantages. At present, then, how to inspire enterprises to achieve better results in ESG practice has become a hot topic in the research field, from the internal drivers of enterprises that are mainly involved in digital strategy [10] to board characteristics [11], internal control and executive experience [12], etc.; in terms of external drivers, studies have focused on environmental regulation [13], business environment [14], public environmental concerns [15], institutional shareholding [16] and other antecedents involving multiple types of stakeholder subjects.

However, compared to formal systems, soft mechanisms centred on cultural constraints can create stable internal norms, especially in emerging countries where formal systems are not yet well developed and where cultural factors can play a potentially more important role [17]. Cultural factors emphasise corporate self-discipline and self-awareness, manifested in the shift from reactive to proactive, as the optimal path to shaping ESG practices. For this reason, there are scholars who have studied the impact of corporate non-financial performance from a soft cultural perspective, and the excellent traditional Chinese culture represented by Confucianism can help to enhance the awareness of corporate social responsibility, increase the quality of environmental information disclosure [18] and improve the ESG performance of enterprises. Red culture based on Chinese scenarios can significantly enhance green innovation [19]. In recent years, with the maturity of text analytics and machine learning methods, some scholars have begun to use corporate text mining to measure the unique cultural characteristics of firms [20] and have found that a corporate culture orientated towards “innovation, integrity, quality, respect and teamwork” promotes firms’ ESG performance. Furthermore, similar studies have found that a culture of “integrity” is a driver of corporate ESG performance [21].

Although existing research has explored traditional outstanding culture in depth, the cultural–emotional genes of corporate nationalism have not received sufficient attention in terms of cultural types. As a matter of fact, the unique corporate culture formed by enterprises’ emphasis on nationalistic culture is an extremely important type of corporate culture. The culture of enterprise nationalism stresses the responsibilities and obligations of enterprises to the state and the nation, advocating that enterprises actively fulfil their social responsibilities and safeguard the interests of the state and the honour of the nation while pursuing their own economic interests. Such cultural values play an important role in the strategic decisions and daily operations of enterprises. The high correlation between corporate nationalistic culture and corporate ESG can be reflected in many management practices. For example, Huawei has internalised nationalistic sentiments into its corporate spiritual culture, and the Basic Law of Huawei states “Huawei takes the responsibility of serving the country with industry and developing the country with science and education, and contributes to the communities in which it operates with the development of the company. We will make unremitting efforts for the prosperity of the great motherland, the revitalisation of the Chinese nation, and the happiness of ourselves and our families”. Since its inception, Fuyao has always been committed to making positive contributions to its customers, businesses, industries, employees and society through its continuous progress and development, with the vision of “making glass for the Chinese people”.

In view of the theoretical significance and practical value, this paper incorporates the informal system of nationalist culture into the theoretical framework of factors influencing corporate ESG performance, trying to fill the research gap on the influence of corporate nationalistic culture on corporate ESG performance among the factors of the informal system, and thus poses the following questions: What is the influence of corporate nationalistic culture on corporate ESG performance? What is the mechanism of influence between the two? Can the informal system be a complementary alternative to the formal system? What is the heterogeneity of the impact of nationalistic culture on corporate ESG performance in specific contexts? In order to answer the above research questions, this paper empirically examines the relationship between corporate nationalistic culture and corporate ESG performance based on data from Chinese listed companies from 2011 to 2022, explores two potential channel mechanisms, namely, attention allocation and internal governance, and explores the moderating effect of formal governance mechanisms in the relationship between the two, while also examining the influence of situational factors, including corporate financing constraints and corporate life cycle, on ESG performance and the heterogeneous effects of corporate nationalistic culture on promoting corporate ESG performance. The possible incremental contributions of this paper may be the following three aspects: (1) constructing a logical framework of “informal system-firm ESG performance”, revealing the impact of nationalistic culture on firms’ non-financial performance, expanding the theoretical factors driving ESG performance from the perspective of micro-firm culture and promoting the development of a “culture and firm behaviour” approach. It expands the theoretical factors driving ESG performance from the perspective of micro-corporate culture and promotes the breadth of research on the integration of “culture and corporate behaviour”; (2) an in-depth exploration of the role of nationalistic culture in enhancing corporate ESG performance. From the two paths of “attention allocation effect” and “internal governance effect” exerted by democratic culture, it is verified that increasing attention to the ecological environment and alleviating the internal agency problem are the main mechanisms through which nationalistic culture affects corporate ESG performance. This provides micro-level empirical evidence for a deeper understanding of how nationalist culture affects corporate ESG performance; (3) this study also introduces three internal and external formal institutions as moderating variables, which helps to understand the heterogeneity of the relationship between corporate nationalist culture and ESG performance from the perspective of internal and external monitoring. On this basis, this paper examines the cross-sectional effects of corporate life cycle and financing constraints, providing practical insights and guidance for the construction and promotion of corporate culture.

2. Theoretical Analysis and Research Hypotheses

The connotation of corporate nationalist culture refers to the identification with and confidence in traditional Chinese culture, emphasising the inheritance of the national image and core values and promoting corporate social responsibility and employee cohesion in order to achieve the unified goal of national rejuvenation and corporate development [22]. This culture tends to emphasise the respect and inheritance of traditional Chinese culture and its fit with the national image and core values, as well as the sense of corporate social responsibility and mission. This cultural atmosphere emphasises the close connection and mutual influence between the enterprise and the country and the nation, prompting the enterprise to reflect its respect for and inheritance of the country’s cultural traditions and values in its business activities. The concept of this culture is deeply rooted in the core values of enterprises, prompting enterprises not only to pay attention to their own economic benefits but also to closely link their development with the prosperity of the country and the revival of the nation. As an informal system, nationalistic culture is also a common norm and value system formed within the enterprise, which may be able to promote the ESG performance of the enterprise. The basic idea of the theoretical deduction of this study is that organisational theory suggests that the environmental organisational culture in which a firm is embedded has a direct impact on the values of its members [23]. The higher echelon theory, on the other hand, links executive values and decision-making behaviour. Thus, this study argues that the nationalistic culture promoted by the firm is specified through the path of action of influencing the values of managers, which in turn affects their behavioural decisions about the firm.

First, corporate nationalist culture can directly affect managers’ attention allocation and enhance corporate ESG performance. Managers’ attention allocation, i.e., the focus of executives’ attention in strategic decision making and daily management, reflects their values [24]. Corporate nationalist culture emphasises the primacy of national interest and social responsibility, and firms that espouse nationalist culture will be more proactive in responding to national strategies. High-quality development, as the primary task of comprehensively building a modern socialist country, emphasises green development with ecological priority. As far as micro-enterprises are concerned, corporate ecological responsibility is an important manifestation of corporate social responsibility [25], and under the influence of a democratic culture, executives will actively respond to the concept of green development and promote the goal of the “dual-carbon” strategy in order to realise the high-quality development of the enterprise. As a result, management will increase their attention to the ecological environment, which directly affects the allocation of resources and strategic decisions in environmental, social and governance aspects, prioritising and investing more resources in sustainable development practices, thus enhancing corporate ESG performance [26]. Promoting the culture of corporate nationalism makes enterprises construct a development concept that is consistent with the government’s value orientation and increases the allocation of corporate management’s attention to the ecological environment, and the allocation of management’s attention determines the enterprise’s resource investment and managerial support [26], which helps to enhance the process of practising the enterprise’s ESG concept and comprehensively improves the enterprise’s ESG performance.

Second, corporate nationalist culture can contribute to corporate ESG performance by mitigating agency problems within the firm. This is manifested in the alleviation of two types of agency problems. (1) According to principal-agent theory, in the absence of effective monitoring and incentive mechanisms, management tends to avoid investments that are beneficial in the long term but slow in the short term, choosing instead projects with stable short-term returns, and this kind of risk avoidance will undoubtedly constrain the enterprise’s ability to achieve sustainable development, which will in turn lead to a decline in ESG performance. Corporate culture reflects the common goals and shared values of the corporate collective [23]. Nationalistic culture, as a corporate culture oriented to “national sentiment” and “social responsibility”, has a profound impact on management’s behavioural norms and values. Under the influence of this culture, the cognition, beliefs and behavioural patterns of the management have undergone subtle changes, and managers tend to show higher moral standards and a sense of responsibility. Such changes broaden decision-making horizons, constrain managers’ opportunistic behaviours and encourage them to pay more attention to the long-term development goals of the enterprise [27], reducing the conflict between personal interests and the long-term development goals of the enterprise. This not only helps to alleviate the first type of agency problem of the enterprise but also makes managers focus more on the sustainable development strategy of the enterprise, which is reflected in the ESG performance of the enterprise. (2) Corporate nationalistic culture also has a significant mitigating effect on the second type of agency problems. As a unique cultural form and corporate atmosphere within the enterprise, nationalistic culture can form an altruistic corporate atmosphere of “focusing on long-term interests and overall interests”, which can help correct the self-interested motivation of managers as self-interested “rational economic beings”, thus restraining self-interested factors from under-investment in ESG or pseudo-ESG behaviours that undermine ESG performance.

Based on the above theoretical analyses, this paper proposes the following hypotheses:

H1: 

Corporate nationalist culture helps to enhance corporate ESG performance.

3. Research Design

3.1. Sample Selection and Data Sources

This paper selected A-share companies listed in Shanghai and Shenzhen from 2011 to 2022 as the research sample and excluded financial companies, ST*, PT companies and samples with missing data of the variables used, finally cleansing 27,733 samples. The data of ESG variables come from CSI ESG ratings in the database of Wardell (Wind). For the measurement of corporate nationalistic culture, we use the “Management Discussion and Analysis” section in the annual reports of all listed A-share companies as the text source, and the other financial data come from the database of Cathay Pacific (CSMAR). All continuous numerical variables are rounded off at the 1% and 99% quantile to avoid the bias caused by extreme values. The software used for statistical tests in this paper is Stata 17.0.

3.2. Measurement of Variables

Dependent variable: ESG performance (ESG). This paper chooses CSI ESG rating data as a proxy variable for corporate ESG performance. The CSI ESG rating data have the characteristics of being close to the Chinese market, covering a wide range of areas and having a strong timeliness, etc. They are calculated to obtain the overall assessment indicators of corporate ESG performance through the 3 first-level indicators of environment, social responsibility and corporate governance, as well as the 14 second-level indicators and 26 third-level indicators under them. Specifically, this paper draws on the practice of previous studies to select the specific scores of specific CSI ratings as the quantitative evaluation of corporate ESG performance [28]. The reason is that the information content of the specific scores is richer and can avoid the effect of variance expansion caused by the artificial assignment of ratings.

Core independent variable: Corporate nationalism culture (Mz_cul). Drawing on previous studies [22], corporate nationalist culture was divided into four measurement subdimensions: national pride, national rejuvenation, corporate role and anti-foreign, and seed word lists and extended word lists obtained by applying the word vector model (Word2vec) were manually constructed for each dimension to capture the intensity of nationalist culture expression under different dimensions. Based on this, a word frequency–inverse document frequency (TF-IDF) weighting scheme was used to measure corporate nationalist culture, which ensures that words that are more frequent in documents and less covered in the corpus are given greater weight when calculating word ratios. The word-weighted counting method based on TF-IDF weights is widely used in textual data measurement, where TF denotes word frequency, obtained by summing the word frequencies of the keywords of the corporate nationalist culture and dividing them by the total number of words reported in the text, which is used to measure the frequency of the occurrence of the keywords of each dimension in the text. IDF denotes the inverse document frequency, which refers to the prevalence of a word in the entire collection of documents, and is obtained by dividing the total number of documents by the number of documents containing the word and then taking the logarithm. Finally, this study summed up the TF-IDF values of the words belonging to the extended word lists of the given subdimensions in the “Management Discussion and Analysis” (MD&A) text to arrive at the final composite score of nationalist culture. Then, the indicator was multiplied by 100 to prevent it from being too small.

Control variables: Referring to previous literature, the control variables selected in this paper include (1) firm size (Size), measured by the logarithm of the firm’s year-end total capital, (2) net profit margin on total assets (ROA), measured by the ratio of net profit to the average balance of total assets; (3) gearing ratio (Lev), measured by the ratio of year-end total liabilities to year-end total assets; (4) cashflow ratio (Cashflow), measured by the ratio of net cash flow from operating activities to total assets; (5) FirmAge, which is measured by the logarithm of the length of time the firm has been in existence; (6) growth rate of operating income (Growth), measured by the current year’s operating income/previous year’s operating income − 1; (7) independent director ratio (Indep), measured by the ratio of independent directors to the number of directors, and (8) two positions in one (Dual), measured by whether the chairman and general manager are the same person. The specific variables are defined as shown in

Table 1. List of variable definitions.

Variable Name	Variable Code	Variable Description
Dependent variable	ESG	Total ESG score in CSI ESG evaluation data divided by 100
Independent variable	Mz_cul	TF-IDF methodology measurements
Control variable	Size	Natural logarithm of total assets for the year
	Lev	Total liabilities at year-end divided by total assets at year-end
	ROA	Net profit/average balance of total assets
	Growth	Current year’s operating income/previous year’s operating income − 1
	Cashflow	Net cash flows from operating activities divided by total assets
	FirmAge	ln (current year − year of incorporation + 1)
	Dual	The chairman and general manager are the same person as 1, otherwise it is 0.
	Indep	Independent directors divided by number of directors

.

3.3. Modelling

In order to investigate the impact of corporate nationalism culture on corporate ESG performance, this paper uses panel data regression, while controlling for year and firm fixed effects; the paper sets up the following model for testing:

$${\mathrm{E}\mathrm{S}\mathrm{G}}_{\mathrm{i}\mathrm{t}}=\mathsf{\alpha }+{\mathsf{\beta }\mathrm{M}\mathrm{z}\_\mathrm{c}\mathrm{u}\mathrm{l}}_{\mathrm{i}\mathrm{t}}+{\mathsf{\gamma }\mathsf{\Sigma }\mathrm{C}\mathrm{o}\mathrm{n}\mathrm{t}\mathrm{r}\mathrm{o}\mathrm{l}\mathrm{s}}_{\mathrm{i}\mathrm{t}}+{\mathrm{u}}_{\mathrm{i}}+{\mathsf{\gamma }}_{\mathrm{t}}+{\mathsf{\epsilon }}_{\mathrm{i}\mathrm{t}}$$

(1)

Among them, the dependent variable ${ESG}_{it}$ represents the firm’s ESG performance, and ${Mz\_cul}_{it}$ is an explanatory variable representing firms’ nationalistic culture. ${\Sigma Controls}_{it}$ is an ensemble of firm-level control variables, ${\mathrm{u}}_{\mathrm{i}}$ is firm-individual fixed effects, and ${\gamma }_t$ is the time fixed effect, which is used to absorb firms’ individual unobservable traits and unobservable effects over time, respectively. ${\epsilon }_{it}$ is a random perturbation term that represents other confounding factors. In the baseline regression model, the core explanatory variable ${Mz\_cul}_{it}$ of the regression coefficient β is the centre of attention in this study, which explains the effect of corporate nationalistic culture on firms’ ESG performance.

4. Analysis of Empirical Results

4.1. Descriptive Analysis

Table 2. Basic statistical characteristics of the main variables.

Variables	N	Mean	SD	Min	Median	Max
ESG	27,733	4.1289	1.1171	1.0000	4.0000	8.0000
Mz_cul	27,733	0.4106	0.1088	0.1907	0.3987	0.7299
Size	27,733	22.2106	1.2931	19.9313	22.0232	26.2296
Lev	27,733	0.4206	0.2073	0.0512	0.4118	0.8948
ROA	27,733	0.0413	0.0656	−0.2481	0.0398	0.2203
Growth	27,733	0.1713	0.3886	−0.5442	0.1108	2.3762
Cashflow	27,733	0.0458	0.0678	−0.1556	0.0455	0.2380
FirmAge	27,733	2.8998	0.3328	1.7918	2.9444	3.5264
Dual	27,733	0.2823	0.4501	0.0000	0.0000	1.0000
Indep	27,733	0.3762	0.0535	0.3333	0.3636	0.5714

reports the descriptive statistical results of the main variables, which results in a total of 27,733 firm–year observations after following the sample sieve-order approach and data cleaning methods. The results show that the mean value of corporate ESG performance (ESG) is 4.1289, indicating that the current level of ESG performance of rated firms in China is low overall; the mean value of corporate nationalistic culture (Mz_cul) is 0.4106, with a maximum of 0.7299, a minimum of 0.1907 and a standard deviation of 0.1088, implying that there are large variations in the corporate nationalistic cultural performance. The other variables are within a reasonable range relative to the standards of the existing literature.

4.2. Benchmark Regression Results

In order to more accurately assess the impact of the core independent variables on the dependent variables, this study first uses an F-test and Hausman test to select the three models mentioned above. In order to more accurately test the effect of the core explanatory variables on the explanatory variables, this study uses an F-test and Hausman test to select the model with practical significance: F test obtained F = 7.50, Prob > F = 0.000, p value is less than 5%, so reject the mixed regression and choose the fixed effect regression; Hausman test obtained chi² = 376.80, Prob > chi² = 0.000, p value is less than 5%, so reject the mixed regression and choose the fixed effect regression; Hausman test obtained chi² = 376.80, Prob > chi² = 0.000, p value is less than 5%, so choose the fixed effect regression, Prob > chi² = 0.000, p value is less than 5%, so reject the random effect regression and choose the panel fixed effect regression.

Table 3. Corporate nationalistic culture and corporate ESG performance.

Variables	(1)	(2)	(3)	(4)
	ESG	ESG	ESG	ESG
Mz_cul	0.463 ***	0.215 *	0.520 ***	0.547 ***
	(4.46)	(1.83)	(4.46)	(4.77)
Size			0.278 ***	0.288 ***
			(12.91)	(13.27)
Lev			−0.990 ***	−1.005 ***
			(−12.87)	(−13.15)
ROA			0.757 ***	0.692 ***
			(5.36)	(5.02)
Growth			−0.000 ***	−0.000 ***
			(−15.77)	(−15.56)
Cashflow			−0.435 ***	−0.430 ***
			(−4.47)	(−4.48)
FirmAge			−0.512 ***	−0.510 ***
			(−3.58)	(−3.64)
Dual			−0.009	−0.013
			(−0.36)	(−0.53)
Indep			1.093 ***	1.046 ***
			(5.78)	(5.73)
Firm	Yes	Yes	Yes	Yes
Year	No	Yes	Yes	Yes
Ind	No	No	No	Yes
N	27,733	27,733	27,733	27,733
Adj. R2	0.499	0.503	0.523	0.527

*, *** denote 10%, 1% significance levels; t-values adjusted for firm-level clustering are in parentheses.

presents the results of the benchmark regressions on the effect of corporate nationalism culture on corporate ESG performance. The regression coefficients of corporate nationalism culture on corporate ESG performance are significantly positive at the 1% level in column (1) controlling only for firm fixed effects for listed companies. The results in column (2) show the regression results controlling for firm and year fixed effects but not putting in other control variables; the regression coefficient of Mz_cul with ESG is 0.215, still significant at the 10% level. Meanwhile, column (3) shows the effect of corporate nationalist culture on corporate ESG performance after adding all control variables; the regression coefficient of Mz_cul is 0.520 with a t-value of 4.46, and the regression coefficient is significant at the 1% level of significance. Column (4) further controls for industry fixed effects based on column (3), and the regression coefficient of Mz_cul is also significant at the 1% significance level. Indicating that corporate nationalistic culture can promote corporate ESG performance, the test results are consistent with the theoretical hypotheses expected, and the research hypothesis H1 is tested. This implies that corporate nationalism culture at the level of informal institutions contributes to the level of corporate ESG performance.

4.3. Robustness Tests

4.3.1. Measurement of ESG in Replacement Firms

First, a new assignment method is used to construct the explanatory variable NewESG, which operates by taking the value of 1 when the CSI ESG rating is in the range of C~CCC, 2 when the rating is in the range of B~BBB and 3 when the rating is in the range of A~AAA. Second, this paper also chooses the Bloomberg ESG composite score (BloombergESG) as a new ESG performance measure to replace the CSI ESG rating metric; the Bloomberg ESG composite score is scored from 0–100 but suffers from a small sample size. Re-regressing with the above two measures, the regression results are shown in columns (1)–(2) of

Table 4. Robustness test.

Variables	(1)	(2)	(3)	(4)
	BloombergESG	NewESG	ESG	ESG
Mz_cul	2.294 **	0.140 ***
	(2.19)	(2.77)
Mz1			0.105 ***
			(3.46)
Mz2				30.869 ***
				(5.01)
Controls	Yes	Yes	Yes	Yes
Firm	Yes	Yes	Yes	Yes
Year	Yes	Yes	Yes	Yes
N	10,150	27,733	27,733	27,733
Adj. R2	0.824	0.381	0.526	0.527

**, *** denote 5%, 1% significance levels; t-values adjusted for firm-level clustering are in parentheses.

, and the coefficients of Mz_cul are all significantly positive at least at the 5% level, which suggests that the conclusions of the benchmark regression are robust.

4.3.2. Measurement of Nationalistic Culture in Replacement Firms

This study draws on similar studies and proposes two alternative measurements for the explanatory variable of corporate nationalist culture [21]. The first measure is the total word frequency of the nationalist culture keyword, first calculated and then its natural logarithm taken (Mz1). The second measure is the nationalist culture keyword calculated in the “Management Discussion and Analysis” (MD&A) portion of the company’s annual report as the word frequency share (Mz2). The higher the values of these two indicators, the stronger the nationalistic culture of the company. The results of the regression analysis are presented in columns (3) and (4) of Table 4, where the coefficients of Mz1 and Mz2 are significantly positive at the 1% level, thereby providing further confirmation of hypothesis H1, which states that a firm’s focus on nationalistic culture enhances its environmental, social and governance (ESG) performance.

4.4. Replacement of the Estimation Model

The data analysed in this study are long panel data of the “big N, small T” type, which inevitably suffer from heteroskedasticity and serial correlation. For this reason, this study adopts the method of Driscoll-Kraay cluster standard error and re-estimates the model using a two-way fixed effects model. The regression results are shown in

Table 5. Robustness test.

Variables	(1)	(2)
	ESG	ESG
Mz_cul	0.396 **	0.573 ***
	(2.53)	(4.38)
Firm	Yes	Yes
Year	Yes	Yes
N	27,733	21,787
Adj. R2	-	0.536

**, *** denote 5%, 1% significance levels; t-values adjusted for firm-level clustering are in parentheses.

, column (1), where the Mz_cul regression coefficients are still significantly positive at the 1% level, indicating that the above test results are still robust.

4.5. Excluding Companies in ESG-Sensitive Industries

Environmentally sensitive industries such as those involved in heavy pollution may have a greater impact on the environment and society if pollution or safety problems occur, and companies in these industries are usually subject to stricter environmental regulations and public concern by the government, and the external capital market is more sensitive to the ESG performance of companies in heavy pollution industries. Compared to non-heavily polluting companies, these companies are under greater pressure to improve their ESG performance, so the improvement of ESG performance of these companies may be seen as a passive response to external pressure. In other words, regardless of whether firms espouse a nationalistic culture, ESG-sensitive industries usually have active or passive incentives to practice ESG, and thus may have better ESG performance. In order to attenuate the bias of the influence of internal cultural characteristics on ESG performance in sensitive industries on the results, it is more general to prove that the conclusion of “corporate nationalistic culture promotes corporate ESG performance”. According to the “Guidelines for Environmental Information Disclosure of Listed Companies”, this paper classifies extractive industry, food industry and heavy pollution industry as ESG-sensitive industries and excludes the samples of enterprises belonging to the above industries from the regression. The results are shown in column (2) of Table 5; the regression coefficients of Mz_cul are significantly positive at the level of 1%, indicating that the findings of this paper are robust.

4.6. Endogeneity Test

Although in the benchmark regression this paper has verified the influential relationship between corporate nationalistic culture and corporate ESG performance, we also recognise that corporations focusing on long-term and sustainable development and practising ESG concepts may disclose to the outside world in their public annual reports that they are responding to the call of the state to engage in corresponding ESG practices. By including nationalist culture rhetoric and expression, it conveys to the outside world that the enterprise actively practices ESG development concepts, serves the national strategy and solves social problems internalised as the enterprise’s mission, as well as the fundamental value orientation of being loyal to the national interest, and thus there may be a causal endogeneity issue between the enterprise’s nationalistic culture and the enterprise’s ESG performance. Therefore, to further ensure the reliability and robustness of this paper’s conclusions, this paper continues to test and discuss the anti-endogeneity issue.

4.6.1. Instrumental Variable Approach

Following the research approach [5], two instrumental variables were constructed for a two-stage regression. As firms’ behavioural decisions are generally influenced by the same activities of other firms in the same industry, the wording of the annual report disclosure of other firms in the same industry in the same year will have a cohort effect and significantly affect the disclosure of this firm. However, there is no direct effect with the ESG performance of this firm, which satisfies the assumption of exogeneity. In this paper, the average level of the nationalistic culture of other firms at the industry–annual level is chosen as an instrumental variable for corporate democratisation culture (IV1). In addition to this, the more exogenous ethnic culture level of firms in the same city–year average (IV2) was chosen as an instrumental variable for stability testing in this study. 2SLS was used to regress the above instrumental variables. Columns (1) to (4) of

Table 6. Instrumental variable regression results.

Variables	(1)	(2)	(3)	(4)
	Mz_cul	ESG	Mz_cul	ESG
IV1	0.562 ***
	(16.90)
IV2			0.819 ***
			(33.27)
Mz_cul		1.028 *		1.476 ***
		(1.91)		(4.70)
Firm	Yes	Yes	Yes	Yes
Year	Yes	Yes	Yes	Yes
N	27,733	27,733	27,733	27,733
Adj. R2	0.753	0.785	0.054	0.053

*, *** denote 10%, 1% significance levels; t-values adjusted for firm-level clustering are in parentheses.

report the regression results of the two instrumental variables on the two stages, respectively. Columns (1) and (3) show that the regression coefficients of IV1 and IV2 are both significantly positive at the 1% level in the first-stage regression, indicating that the instrumental variables selected in this paper are able to satisfy the correlation condition, and the results of columns (2) and (4) show that the estimated coefficients of Mz_cul are significantly positive at the 10% level in the second-stage regression. In addition, the Kleibergen–Paap rk LM statistic rejects the original hypothesis of under-identification at the 1% significance level, and the Cragg–Donald Wald F statistic is much larger than the critical value of 16.38 in the Stock–Yogo weak instrumental variable identification test, and the above statistical tests collectively validate the reasonableness of the instrumental variables selected in this paper. The above results show that the coefficient of Mz_cul is significantly positive at the 1% level, and the findings remain robust.

4.6.2. Variable Span

In order to alleviate the possible reverse causality problem between the independent variables and the dependent variable and considering the lagged nature of the development of corporate culture, this paper respectively lagged the corporate nationalism culture by one period and front-loaded the corporate ESG performance by one period, and the regression results are shown in

Table 7. Regression results for lagged variables, PSM nearest neighbour matching and radius matching.

Variables	(1)	(2)	(3)	(4)
	Dependent Variable One Period Ahead	Independent Variable Lagged One Period	PSM:1:1 Match	PSM: Radius Matching
	F. ESG	ESG	ESG	ESG
Mz_cul	0.287 **		0.562 ***	0.460 ***
	(2.27)		(4.41)	(3.62)
L.Mz_cul		0.293 **
		(2.32)
Firm	Yes	Yes	Yes	Yes
Year	Yes	Yes	Yes	Yes
N	23,170	23,170	19,680	19,644
Adj. R2	0.566	0.551	0.522	0.525

**, *** denote 5%, 1% significance levels; t-values adjusted for firm-level clustering are in parentheses.

. The results of the variable lag test (columns (1)–(2)) in Table 7 show that whether the enterprise nationalism culture is lagged or front-loaded to the enterprise ESG performance, the enterprise nationalism culture always shows a positive promotion effect on the enterprise ESG performance, and the regression coefficients of Mz_cul are all significant at the 1% level.

4.6.3. Propensity Score Matching

In order to alleviate the inherent problems that may arise from sample selection bias, this paper adopts the propensity score matching (PSM) method for further testing and analysis. The sample data were first divided into high and low nationalistic culture groups based on the size of the mean value of corporate nationalistic culture by year and industry. Secondly, control variables were selected as covariates and matched using 1:1 nearest neighbour matching and radius matching methods. In order to test the quality of propensity score matching, the samples before and after matching were subjected to a balance test, and the results showed that the covariates involved in matching were not significantly different between the control group and the experimental group and that the standard deviations were all controlled to be less than 5%, which made the overall matching effect ideal. The above regressions were re-run on the matched samples, and the regression coefficients of Mz_cul in columns (3)–(4) of Table 7 were still significantly positive at the 1% level, which still yielded research conclusions consistent with the main test.

5. Expanded Analysis: Analysis of Mechanisms of Action and Regulatory Mechanisms

5.1. Mechanisms of Action Tests

Based on the theoretical extrapolations in the research hypotheses above, the enhancement effect of corporate nationalism culture on corporate ESG performance is mainly realised through changing the mechanism of corporate management’s attention allocation and internal governance mechanism problems. In this part, two possible transmission paths of enhancing changing corporate management’s attention allocation and mitigating internal agency problems will be validated. The validation methodology refers to the authoritative literature on mechanism research methods and operational guidelines, and the following model was used for mechanism testing [29]:

$$M_{it}={\theta }_0+{{\theta }_{1}Mz\_cul}_{it}+{\delta \Sigma Controls}_{it}+u_i+{\gamma }_t+{\epsilon }_{it}$$

(2)

where $M_{it}$ is the mechanism variable measuring attention allocation and agency problems, and the rest of the control variables and fixed effects are chosen to remain consistent with the model (1) setting in the benchmark regression.

5.1.1. Attention Allocation Mechanisms: Ecological Attention Allocation

Institutional theory suggests that organisational behavioural decisions are constrained and influenced by informal institutions. The culture of corporate nationalism highlights the concern for the long-term interests of the state and the nation, a concern that fits with the goal of pursuing long-term sustainable development in the ESG concept. As an important micro-body of economic development and environmental protection, the culture of corporate nationalism profoundly influences the values and behavioural decisions of management, causing them to place national interests and social responsibility at the core of the corporate mission, thus strengthening the awareness of corporate social responsibility. This enhanced awareness further promotes enterprises’ attention and investment in environmental protection and sustainable development. Reflected in the management’s behaviour, it is manifested in the management’s increased ecological and environmental attention allocation, so that the active attention allocation provides a positive thrust to the enterprise’s green sustainable development and ultimately achieves the comprehensive improvement of environmental performance, economic performance and social performance from within.

This paper selects two measures of executive ecological attention. We draw on the approach of selecting words related to environmental issues in corporate annual reports to quantify corporate environmental issue attention by text analysis and as a proxy variable for corporate eco-environmental attention [26]. And the two methods of adding 1 to the absolute number of relevant word frequencies to take the logarithm and the relative proportion of word frequencies in the text were used to test, respectively. The regression results are shown in columns (1) and (2) of

Table 8. Mechanism of action analysis.

Variables	(1)	(2)	(3)	(4)
	Att1	Att2	Cost1	Cost2
Mz_cul	0.155 **	0.002 ***	−0.035 ***	−0.020 ***
	(2.31)	(12.54)	(−2.88)	(−6.16)
Firm	Yes	Yes	Yes	Yes
Year	Yes	Yes	Yes	Yes
N	27,733	27,733	27,733	27,733
Adj. R2	0.647	0.659	0.782	0.445

**, *** denote 5%, 1% significance levels; t-values adjusted for firm-level clustering are in parentheses.

. Specifically, column (1) is the regression result of attention allocation (Att1) measured using the word frequency method, and column (2) is the regression result of attention allocation (Att2) measured using the relative word frequency share method, and the coefficient of Mz_cul in the results of the two columns is significantly positive at least at the 10% level; the overall results indicate that ecological attention enhances management’s attention to ecological and environmental protection allocation, which in turn enhances corporate ESG performance.

5.1.2. Internal Governance Mechanisms: Internal Agency Issues

In an environment with a high level of nationalistic culture, management will pay more attention to the consistency between the company’s long-term development and the national interest, thus reducing the possibility of pursuing short-term self-interest, lowering management’s short-term opportunistic behaviours, increasing management’s initiative to implement ESG strategies within the enterprise and treating ESG strategies as a long-term “value investment” rather than a “cost burden” to gain competitive advantages, thus helping to improve the enterprise’s ESG performance.

In this paper, we draw on the existing literature to construct variables that reflect firms’ agency costs [30,31]. We have chosen two methods to measure the agency costs of firms. Drawing on Wang, “the ratio of administrative expenses and selling expenses to operating revenues” is chosen as the proxy variable for the first type of agency problems (Cost1), and “the ratio of other receivables to total assets” is chosen as the proxy variable for the second type of agency problems (Cost2). Columns (3) and (4) of Table 8 report the regression results of the test, and it can be seen that the regression coefficients of corporate democratic culture on the first type of agency costs and the second type of agency costs are significantly negative, indicating that corporate nationalistic culture can alleviate the two types of agency problems.

5.2. Analysis of the Moderating Effect: The Moderating Mechanism of the Internal and External Formal System

The extent to which the culture of corporate nationalism affects firms’ ESG performance may be related to the level of firms’ internal and external formal governance. This paper will further develop a deeper understanding of the governance effects that corporate nationalist culture can exert in terms of the moderating mechanisms of three monitoring factors: external governance mechanisms (analyst attention and institutional investor shareholding) and internal governance mechanisms (embeddedness of party organisations).

5.2.1. Corporate Nationalistic Culture, Analyst Concerns and ESG Performance

As an important force of market supervision, analyst attention can play a good external supervision role, reduce the excessive pursuit of short-term interests by management and restrain the speculative behaviour of enterprises. The higher the analysts’ attention, the stronger their supervisory role on listed companies. In addition to the role of supervisor, analysts also play the role of information transmission, providing timely and objective analyses and reports on corporate ESG actions and transmitting the information to external investors, which makes it easier for companies that pay attention to ESG to gain an advantage in market competition. Therefore, it seems that analyst attention pushes companies to pay attention to ESG inputs and improve ESG performance from the market demand side. Accordingly, this study concludes that analyst attention serves the function of monitoring firms’ ESG behaviour. Taken together, the positive impact of corporate nationalism on ESG performance is more significant at lower levels of analyst monitoring, i.e., corporate nationalism plays the role of a substitute for analysts as an external monitoring mechanism.

In this paper, we use the natural logarithm of the number of analysts’ concerns (Fx), following the practice in the previous study [32]. As can be seen in column (1) of

Table 9. Analysis of regulatory mechanisms.

Variables	(1)	(2)	(3)
	ESG	ESG	ESG
Mz_cul	1.163 ***	1.515 ***	0.598 ***
	(7.54)	(7.60)	(4.87)
Fx	0.276 ***
	(9.41)
Mz_cul*Fx	−0.444 ***
	(−6.65)
Ins		0.011 ***
		(6.07)
Mz_cul*Ins		−0.023 ***
		(−6.32)
party			0.100 ***
			(4.45)
Mz_cul*Party			−0.183 ***
			(−3.44)
Firm	Yes	Yes	Yes
Year	Yes	Yes	Yes
N	27,733	27,733	27,733
Adj. R2	0.530	0.527	0.526

*** denote 1% significance levels; t-values adjusted for firm-level clustering are in parentheses.

, the regression coefficient of the interaction term between analysts’ concerns and the firm’s nationalistic culture (Mz_cul*Fx) is significantly negative, indicating that when the number of analysts’ concerns is low, the positive impact of the firm’s nationalistic culture on the firm’s ESG performance is more pronounced, which supports the theoretical analysis above.

5.2.2. Corporate Nationalistic Culture, Institutional Investor Shareholding and ESG Performance

As an important participant in the external monitoring of enterprises, institutional investors influence the strategic decisions and development of enterprises through shareholding, voting and participation in corporate governance. Studies have explored whether institutional investors can play the role of external governance, and the research results have mainly formed two views: the “monitoring effect” and the “pressure effect”. According to the monitoring effect viewpoint, the entry of institutional investors plays the function of monitoring the internal governance of enterprises and puts higher demands on the ESG performance of enterprises. The pressure view suggests that the increase in institutional investors makes firms focus on cashing in on short-term economic returns to investors, making them less motivated to invest in long-term value investments. In order to examine the differences in the motivations of different institutional investors, scholars have classified institutional investors into long-term institutional investment and short-term institutional investment categories to better analyse their impact on corporate behavioural decisions and performance. Based on this categorisation, this study concludes that long-term institutional investors have the attribute of “patience”, pursue the concept of value investment, pay attention to and capture the long-term value of enterprises and actively promote enterprises to carry out ESG strategic decision making and management practices. The theory of short-term performance pressure states that when companies face short-term performance pressure, management will often prioritise strategies that can quickly improve financial performance, while ignoring long-term sustainable development goals. The strong financial pressure and market orientation of short-term institutional investors may weaken national cultural drivers and lead to a reduction in corporate investment in environmental, social and governance (ESG). Based on the above analyses, this study concludes that the positive impact of corporate nationalistic culture on corporate ESG performance is more significant at lower levels of institutional investor shareholding levels.

This paper uses the proportion of shares of listed companies held by institutional investors to the total share capital of the company to measure the level of institutional investors’ shareholding (Ins., As can be seen in column (2) of Table 9, the regression coefficient of the interaction term between analysts’ concern and corporate nationalist culture (Mz_cul*Ins) is significantly negative, and the results indicate that when the institutional investors’ shareholding level is low, the positive impact of corporate nationalism culture on corporate ESG performance is more pronounced, supporting the theoretical analysis above.

5.2.3. Corporate Nationalist Culture, Party Organisation Establishment and ESG Performance

The embedding of Party organisations in enterprises, as an important part of the modern enterprise system with Chinese characteristics, is an important form of practice in the corporate governance system. Party organisations play a supervisory and management role and value leadership in enterprises and are directly involved in the strategic decision making and daily operation of enterprises. Existing studies have found that the embeddedness of corporate Party organisations can balance the interests of the board of directors, reduce the opportunistic behaviour of management, mitigate internal agency costs, regulate the development decisions of the enterprise and safeguard the fulfilment of corporate social responsibility [33], thus enhancing the level of corporate governance. The core purpose of this formal governance mechanism within the enterprise is to ensure that corporate behaviour is in line with the overall interests of the state and society. The Party’s philosophy of governance and the values of “altruism” and “contributing to society” influence corporate management’s sense of responsibility and sustainable development values. For enterprises with Party organisations, the Party organisation plays a key regulatory role in their daily operations, which helps to correct the tendency of enterprises to pursue economic benefits to the neglect of social responsibility and environmental protection and fundamentally ensures the effective implementation of ESG decisions, which helps to improve the ESG performance of enterprises. Therefore, this study concludes that, compared to firms without Party organisations, the sample firms with embedded Party organisations are less affected by the governance effects of their own nationalistic culture and that the motivation for corporate ESG practices mainly stems from the normative requirements of the formal governance mechanism, thus presenting a substitution effect rather than a synergistic effect with the nationalistic culture.

This paper uses Party organisation members’ access to executive management to measure Party organisation establishment (Party) [34]. As can be seen in column (3) of Table 9, the regression coefficient of the interaction term between analysts’ concern and corporate nationalist culture (Mz_cul*Party) is significantly negative, and the results suggest that for firms without Party organisations involved in governance, corporate nationalist culture has a stronger positive impact on firms’ ESG performance, i.e., it is reflected as a “substitution effect” on the formal institutional environment.

Summarising the above results, they all illustrate the view that corporate self-discipline brought by corporate nationalistic culture acts as a “substitute” for external governance mechanisms, i.e., when the level of external supervision is low, the positive impact of nationalistic culture on corporate ESG performance is more significant. In other words, the corporate self-regulation brought by high nationalistic culture acts as a “substitute” for external governance mechanisms and enhances corporate ESG strategy consciousness.

6. Heterogeneity Analysis

The above studies show that corporate nationalism culture can indeed contribute to corporate ESG performance. Further, the question that tends to provoke thinking is as follows: is the relationship between corporate nationalism culture and corporate ESG performance affected by firms’ corporate characteristics and development stages? Next, this paper examines the heterogeneous effects of corporate nationalism culture on the corporate ESG performance of listed companies by focusing on two perspectives: corporate financing constraints and life cycle. Group tests of heterogeneity are conducted for both aspects to uncover the existence of impact variability.

6.1. Heterogeneity Analysis of Financing Constraints

This paper argues that the positive effect of corporate nationalist culture on ESG is also largely dependent on the internal financial abundance of the firm, which, according to resource dependence theory, is largely dependent on the firm’s ability to acquire and manage resources for its behaviour and performance. Similarly, ESG strategy inputs are also dependent on financial resources. First, financial abundance gives management greater freedom and decision-making space to promote nationalistic culture and ESG practices, avoiding business decisions that run counter to corporate culture due to short-term financial pressures and reducing the intrinsic drive for corporate ESG. Second, low financing constraints enhance management’s sense of psychological security, making it more willing to take long-term-oriented decisions and actions, which is compatible with the concepts of long-termism and social responsibility in nationalist culture, and thus more favourably promotes ESG performance improvement.

To verify this theoretical conjecture, this paper chooses SA to quantify the intensity of financing constraints at the firm level and defines a subsample of firms with high and low financing constraints based on the median firm. Columns (1) and (2) of

Table 10. Heterogeneity analysis.

	(1)	(2)	(3)	(4)	(5)
Variables	ESG	ESG	ESG	ESG	ESG
	Low Financing	High Financing	Formative Years	Maturity	Recession (in Economics)
Mz_cul	0.666 ***	0.288 *	0.726 ***	0.091	0.581 **
	(4.10)	(1.78)	(4.03)	(0.45)	(2.49)
Firm	Yes	Yes	Yes	Yes	Yes
Year	Yes	Yes	Yes	Yes	Yes
N	13,257	14,158	11,762	7652	6123
Adj. R2	0.535	0.538	0.503	0.555	0.583

*, **, *** denote 10%, 5%, 1% significance levels; t-values adjusted for firm-level clustering are in parentheses.

show that the effect of corporate nationalistic culture on corporate ESG performance is significantly positive at the 1% level in the sample with low financing constraints, while both are significantly positive at the 10% level in the sample with high financing constraints, which suggests that the positive effect of corporate nationalistic culture on corporate ESG performance is more pronounced in the sample of firms with lower financing constraints. This suggests that the strength of financing constraints can have a heterogeneous effect on the ESG promotion utility of corporate nationalist culture.

6.2. Heterogeneity Analysis of the Impact of the Enterprise Life Cycle

Enterprise life cycle theory holds that enterprises face different challenges and opportunities at different life cycle stages, and likewise, at different life cycle stages, enterprises have different needs for cultural adaptability. By strengthening the nationalistic culture, the environmental responsibility, social responsibility and governance level of the enterprise can be improved, so that the enterprise can quickly win market attention and enhance the enterprise’s market reputation, and the enhancement of the enterprise’s reputation will bring the enterprise multifaceted strategic resources to make up for the limitations of the enterprise’s resources and capabilities in the growth period. For enterprises in the mature stage, they have already established a relatively solid market position and a mature internal management system, and at this stage, they usually focus on compliance and market mechanisms, and the impact of culture on ESG performance may be masked by the established systems and structures. Finally, in the recessionary period when companies are facing the challenges of shrinking markets and resource shortages, companies in this stage may rely more on strengthening internal “soft power” construction, which can help them re-establish competitive advantages in the marketplace by reinforcing the predominance of nationalistic culture and spirit in corporate culture, stimulating employees’ sense of responsibility and spirit of innovation and promoting corporate ESG practices.

This article refers to the division method of enterprise life cycle and conducts a heterogeneity analysis on enterprises in different life cycles [33]. The results in columns (3) to (5) of Table 10 show that the regression coefficient of corporate nationalism culture in the growth stage group is 0.726 and passes the statistical significance test of 1%; the regression coefficient of the maturity stage group is 0.091 but does not reach statistical significance; and the regression coefficient of corporate nationalism culture in the decline stage group is 0.581 but with a small t-value (t value is 2.49). This suggests that corporate nationalism culture has a stronger enhancing effect on the ESG performance of firms in the growth period, which is consistent with theoretical expectations.

7. Research Conclusions and Management Implications

7.1. Conclusions of the Study

This study takes an important informal institutional perspective of corporate culture to explore the impact of cultural factors on companies’ ESG performance, using non-financial listed companies in Shanghai and Shenzhen from 2011 to 2022 as a sample. By collecting the annual reports of listed companies and using text analysis methods to quantify corporate nationalist culture, this study examines the impact and mechanisms of corporate nationalist culture on ESG performance from an informal institutional perspective, providing a new analytical perspective and empirical evidence to reveal the informal institutional factors of corporate ESG performance. The research results show that corporate nationalist culture has a significant “driving effect” on corporate ESG performance. The mechanism test shows that corporate nationalist culture drives corporate ESG performance mainly through two channels: changing managers’ attention allocation and mitigating agency problems. This research also found that corporate nationalist culture has a stronger positive effect on corporate ESG performance in a scenario with a lower formal system, which shows that corporate nationalist culture has played the role of a “soft” alternative mechanism, guiding the value of corporate operations and playing a governance role in a scenario with a weak formal system. The results of the heterogeneity analysis show that the promotion of corporate ESG performance by corporate nationalist culture is more pronounced in firms with low financial constraints, growing firms and declining firms. These findings provide empirical research evidence for the promotion of Chinese cultural characteristics.

7.2. Managerial Implications

Our research reveals some policy implications that are of practical significance to managers. Corporate culture is the foundation for building long-term competitiveness and plays a key role in promoting sustainable development. Management should actively promote core values such as patriotism, collectivism and social responsibility to enhance the cohesion and adaptability of corporate culture. At the same time, companies should promote the process of sustainable development based on firm cultural confidence and shared values. In promoting ESG practices, in addition to relying on formal systems such as policy regulation, external supervision and internal governance, managers should also give full play to the driving role of informal systems represented by nationalistic culture. By combining informal systems with formal systems, companies can more effectively integrate ESG concepts into their strategies, improve ESG performance and ultimately achieve a sustainable competitive advantage.