National Energy‐Use Culture and Corporate Bankruptcy Risk

Using a sample of 8234 firms from 63 countries between 2002 and 2019, we examine the relationship between national energy‐use culture and the likelihood of firm bankruptcy. We operationalize national energy‐use culture using energy intensity (energy consumption per unit of GDP). This widely adopted country‐level indicator captures the prevailing efficiency of a nation's energy allocation. It reflects the cumulative outcomes of its policy environment, industrial structure and societal norms around energy use. The results reveal that higher national energy intensity increases firms' bankruptcy risk, consistent with the view that countries whose energy‐use culture is characterized by inefficiency impose greater operational and reputational costs on resident firms. We also document that the benefits of lower energy intensity vary by geographical location, indicating that a one‐size‐fits‐all approach is unlikely to succeed. In addition, the corporate tax rate, growth potential and industry of operation exacerbate the relationship between energy intensity and the likelihood of bankruptcy, while financial constraints attenuate it. We discuss the theoretical mechanisms linking national energy use culture to corporate financial distress and situate our findings within the broader literature on sustainable business practices and corporate financial risk.