Distinct pillars – divergent returns: impact of a cross-country analysis of the environmental and social pillars on firms' financial performance across Asia

Although the relationship between corporate social responsibility and financial performance has been studied extensively, the results remain inconclusive. This study extends prior research by disaggregating social responsibility into two primary components – the social and environmental pillars – to investigate how cultural differences moderate their respective impacts on financial performance, using longitudinal data from 21 different Asian countries containing 16,281 firm-year observations. We employ a multi-level hierarchical mixed effects model to test the interaction effects of various Hofstede's cultural dimensions on the relationship between firms' social responsibility and financial performance. We conduct a Wald test to determine whether the effects of the two pillars differ significantly. The results reveal that in cultures characterised by high power distance and long-term orientation, the environmental pillar significantly outperforms the social pillar in driving financial returns.