Association between institutional quality and carbon emissions performance in heterogeneous cultural environment

Purpose The aim of the current study is to examine the association between institutional quality and carbon emissions performance of private-sector entities (PSEs) within a heterogeneous cultural environment. Design/methodology/approach Using a panel research design, the authors analysed a sample of high-ranking multinationals over 15 years, from 2009 to 2023. Our combined dataset has 3,559 firm-year observations. An ordinary least square fixed-effect regression model was used in the analysis. To assess the robustness of our results against potential endogeneity, we employ instrumental variable regression. Findings Results show that the impact of institutional quality mechanisms on carbon emissions vary by cultural environment. In collectivist societies, voice and accountability significantly diminish carbon emissions, whereas rule of law enhances carbon emissions reduction in restraint societies. Voice and accountability diminish carbon emissions in long-term orientation societies but drive up emissions in short-term orientation societies. Our findings remain robust after accounting for potential endogeneity. Originality/value This study contributes to the literature on the intersection of governance, culture and climate action. The authors present empirical evidence that institutional quality mechanisms impact total emissions and the emission types differently in heterogeneous cultural settings. This knowledge is important for developing relevant and effective strategies by the government to effectively tackle emissions problem suitable to local circumstances of countries.