The effects of country governance quality on corporate sustainability and ethical behaviour

Francisco, Paulo Morais

http://hdl.handle.net/10400.1/29104

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Euro Fin Management - 2026 - Francisco - The Effects of Country Governance Quality on Corporate Sustainability and Ethical.pdf		1.47 MB	Adobe PDF	Ver/Abrir

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Autores

Francisco, Paulo Morais

Resumo(s)

Using institutional theory, we examine how country governance affects two ESG outcomes: ESG performance and ESG controversies. With Refinitiv/LSEG data for ~146,000 firm‐years in 86 countries (2002–2023) and World Bank WGI, we apply a Mundlak within/between decomposition to test complementarity versus substitution (performance) and prevention versus detection (controversies). Better governance is strongly associated with higher ESG performance—overall and across E, S and G—especially cross‐country. Yet governance also predicts more reported controversies, consistent with detection/visibility rather than worse conduct. Instrumental Variable and DiD tests corroborate these results. JEL Classification: D02, M14, Q56, C23