Do employee relation responsibility and culture matter for firm value? International evidence

- Employee relationship responsibility (ERR) is a sub-sector in CSR worthy of an analysis.
- ERR covers diverse areas (ex. human rights) and builds up the reputation of a firm.
- Firms with good ERR demonstrate significantly higher levels of firm value.
- Positive impact of ERR on firm value is strengthened with national culture.
- This seems to be caused by greater marginal effect of ERR in some cultures.

Using a dataset on employee relation responsibility (ERR) from 30 countries, we examine the effects of employee relationships on firm value. In addition, this paper attempts to understand the role of national cultural dimensions regarding their relation with ERR and firm value. We find that firms with good employee relationships tend to demonstrate significantly higher levels of firm value than firms whose employees exhibit poor rapport. We also find that the positive impact of ERR on firm value is significantly strengthened in cultures with high degrees of power distance, collectivism, masculinity, and risk avoidance. These results are robust even after mitigating endogeneity issues, adjusting sample composition bias and using alternative independent variables. Our findings extend the previous CSR-related research into a new horizon, with the objective of investigating this less explored subject within the sub-areas of CSR research. The findings of this study are noteworthy given that we incorporate the role of national culture into the ERR-firm value link, a task that has not yet been undertaken.