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Shaped by Confucius: The Cultural Origin of Corporate Behavior
Published online by Cambridge University Press: 16 April 2026
Abstract
We examine how Confucian culture operates as an informal institution by fostering relational contracts that substitute for formal legal frameworks in shaping corporate behavior. Using data on historical Confucian academies near firms’ headquarters in China, we find that greater cultural exposure is associated with higher investment in stakeholder relationships—measured by social contribution, stakeholder protection, courtesy expenses, patenting, and trade credit. These effects persist after controlling for human capital and alternative cultural influences, and weaken in regions with stronger formal institutions. Our findings highlight the enduring role of culture in supporting trust-based governance when formal contracting is limited.
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- Research Article
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- Copyright
- © The Author(s), 2026. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington
Footnotes
We thank Kai Li (the editor), Andrew Sinclair (the referee), Patrick Bolton, Sebastian Ebert, Dawoon Kim, Yuexin Li, Chicheng Ma, Nicola Pavanini, Jiwei Qian, Wei Shan, Rong Wang, Feng Zhang, Joe Zhang, Wei Zhang, Haikun Zhu, as well as conference and seminar participants at the 2023 Asian Finance Association Conference, 2022 Asia-Pacific Corporate Finance Online Workshop, 2022 China International Forum on Finance and Policy, 2022 European Winter Finance Conference, 2022 New Zealand Finance Meeting, 2022 Paris Financial Management Conference, 2022 Singapore Scholar Symposium, Nankai University, National University of Singapore, Singapore Management University, Sun Yat-Sen University, Shanghai University of Finance and Economics, Renmin University of China, and Wuhan University for their constructive comments and suggestions. An earlier version of this article was circulated under the title “Culture and Firms.” All authors contribute equally and their names are listed alphabetically.
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Gu et al. supplementary material
Gu et al. supplementary material
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