Cultural dimensions and corporate controversies: The moderating role of corporate governance

Abstract

This study examines the relationship between national culture, defined by Hofstede's cultural dimensions, and corporate controversies across countries, while assessing the influence of firm-level corporate governance on moderating this connection. It finds more likelihood of controversies in cultures characterized by individualism, femininity, high power distance, low uncertainty avoidance, short-term orientation, and indulgence. Notably, certain CG mechanisms—especially board independence and a higher presence of female directors—can help reduce firms’ involvement in controversies, though their moderating effects vary across different cultural contexts. Furthermore, enhancing our baseline analysis, we categorize corporate controversies, analyse the influence of cultural traits on each category, and highlight specific cultural combinations associated with a decreased risk of controversies. Our findings underscore the complex interplay of cultural influences and governance structures in the ethical operations of cross-country firms.