Sustainability from institutionalism: determinants of Korean companies’ ESG performances

Abstract

This study delves into the factors influencing the sustainability performance of Korean companies, as measured by ESG (Environmental, Social, and Governance) scores, through the neo-institutional theory perspective. While existing research has focused on the relationship between an organization’s ESG performance and its financial outcomes, this study concentrates on analyzing how the firm’s legitimacy signaling, stakeholder pressures, visibility, and government industry regulations impact sustainability performance among listed Korean companies. Our empirical analysis indicates that the ESG scores reflecting a firm’s sustainability performance are positively influenced by all four factors. First, this study may contribute to the sustainability literature by providing a coherent and rich theoretical foundation. Second, this study may contribute to viewing the phenomenon related to sustainability from various angles. In addition, by verifying in more detail the impact of gaining legitimacy through the introduction of institutional norms in the existing new institutionalism discourse on organizational survival and growth, legitimacy signals, and corporate visibility, the theoretical contribution of this study can also be made by uncovering an intermediate mechanism in which various institutional factors such as stakeholder pressure and institutional regulations can be advantageous for growth and survival by substantially improving the sustainability management level of an organization.