ESG Performance and Stock Market Outcomes: The Moderating Role of National Culture in a Global Setting

This study investigates the relationship between firms’ environmental, social, and governance performance on stock market performance using a global unbalanced panel of 10,043 listed global firms from 2002 to 2024. Employing firm and year-fixed effects with instrumental variable estimation, we find a robust positive association between ESG scores and subsequent market performance. The strength and direction of this relationship vary systematically across national cultures, as captured by Hofstede’s dimensions. The positive effect is most pronounced in regions with strong institutional frameworks, such as Europe and North America, and in cultures characterised by higher uncertainty avoidance and long-term orientation. These findings suggest that the market relevance of ESG is context dependent rather than uniform across countries. By integrating signalling and value-relevance theories with cultural and institutional moderators, this study clarifies the contextual conditions under which ESG becomes financially material, offering actionable insights for managers, investors, and policymakers.