Reexamining the relationship between ESG and firm performance: Evidence from the role of Buddhism

This study examines the relationship between environmental, social, and corporate governance (ESG) and firm performance, with a focus on the impact of Buddhism. Our findings suggest the following: (1) The local Buddhism environment weakens the positive relationship between ESG and firm performance, indicating that ESG practices motivated by internal altruism may not contribute to firm performance. (2) The moderating effect of Buddhism is more pronounced in firms with stronger alignment or monitoring, in which ESG practices are more likely to be motivated by the desire for profitability, i.e., privately owned firms and those with higher institutional ownership and media attention. (3) The attenuating effect of Buddhism's moderating role is observed in two categories of firms: those with heightened exposure to ESG-related risks and those operating in recent eras with a greater focus on ESG, which are more likely to benefit from ESG practices with greater external utility. •This study examines the relationship between ESG practices and firm performance in respect to Buddhism, a religion that emphasizes doing good to all stakeholders.•The local Buddhism environment plays a critical moderating role in the internal driving factor of ESG by weakening the positive relationship between ESG and firm performance.•The moderating effect of Buddhism is more pronounced in firms with stronger alignment or monitoring.•The negative moderating influence of Buddhism diminishes or disappears in firms with higher ESG risk exposures and firms in more recent eras where ESG is likely to have higher external utility.•There is a complex relationship between ESG and firm performance that is influenced by both the internal motivation and external utility of ESG practices.