Does confucian culture restrain ESG decoupling? Evidence from China

Abstract

This paper empirically examines the role of Confucian culture as an informal institution on firms’ environmental, social, and governance (ESG) decoupling. Using a sample of Chinese A-share listed companies from 2009 to 2023, we find that Confucian culture significantly inhibits the phenomenon of ESG decoupling. Further analysis reveals that Confucian culture can mitigate ESG decoupling by restraining management overconfidence and promoting managerial integrity. Moderating effect analysis reveals that Confucian culture exerts a more pronounced inhibitory effect on ESG decoupling when companies face weaker external supervision. This study demonstrates that Confucian culture, as the most widely and profoundly influential traditional culture in Chinese society, is an important governing force of ESG decoupling, thereby broadening the literature on ESG decoupling.