How do different types of institutions shape corporate environmental, social and governance performance?

Purpose This study aims to investigate the institutional determinants of firms’ environmental, social and governance (ESG) performance. Drawing on stakeholder and institutional theories, the authors examine how three distinct types of national institutions – formal, informal and financial market institutions – shape firms’ ESG performance. By analyzing the differential effects of these institutional types on each component of ESG performance, the study offers a more nuanced understanding of the relationship between institutional environments and corporate social performance. Design/methodology/approach The authors developed and tested a multi-source data set analyzing the ESG performance of 3,872 firms across 49 countries over 15 years (2002–2016) using data from the ASSET4 database. To assess the relationships between the three types of institutions and firms’ ESG performance, the authors used multilevel random-effects models with lagged independent variables. Findings This research provides a comprehensive analysis that links specific types of institutions to each component of ESG performance, rather than to aggregate corporate social responsibility performance. It advances stakeholder and institutional theories by demonstrating how distinct stakeholder groups – represented through different institutional arrangements – shape specific ESG outcomes, thereby offering valuable insights for policymakers and managers. Originality/value This study provides a comprehensive examination of how distinct types of institutions are linked to individual ESG dimensions.