Can proximity to World Heritage Sites reduce corporate misconduct? Evidence from Chinese listed companies

Abstract

World Heritage Sites are recognized globally for their outstanding value to humanity, embodying landmarks of cultural, historical, or scientific significance, which exert a profound socioeconomic influence on surrounding regions. Although prior studies have explored the influence of broader cultural contexts on corporate behavior, the impact of proximity to World Heritage Sites on firms’ ethical conduct remains largely underexplored. Using firm-level data from China, with its rich World Heritage Sites and ancient civilization, we find a significant negative association between the number of World Heritage Sites near a company and corporate misconduct, indicating that firms closer to these sites are less likely to engage in violations. Through our mechanism analysis, we demonstrate that proximity to World Heritage Sites reduces corporate misconduct by fostering a stronger corporate culture and improving the overall quality of corporate governance, driven by heightened legitimacy pressures. We further find that the influence of proximity to World Heritage Sites is more pronounced in non-state-owned companies and those with lower corporate social responsibility. These findings contribute to the field of cultural finance and offer valuable insights for policymakers and investors.