Articlegold2021

Relationship between corporate sustainability performance and corporate financial performance: evidence from U.S. companies

49 citations0/0 files storedEquilibrium Quarterly Journal of Economics and Economic Policy

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Corporate Social Responsibility Reporting Environmental Sustainability in Business Sustainability and Innovation in Business

Abstract

Research background: Sustainable development at the enterprise level is understood as the integration of economic, environmental and social dimensions aimed at meeting the needs of all firm?s stakeholders in the present and in the future. Therefore, it is crucial to evaluate the relationship between economic, environmental and social sustainability performance of a company and its financial performance. Purpose of the article: Considering the business model for sustainability as well as the debatable results of empirical research on the relationship between corporate sustainability performance (CSP) and corporate financial performance (CFP), the essential aim of the paper is to answer the question whether the improvement of corporate sustainability performance in its all particular dimensions brings about higher total revenues (TR) of a company. Methods: The main method of empirical research is panel regression models based on Cobb-Douglas production function, which has been extended to include variables of corporate sustainability scores. The selection between pooled OLS model, random-effects model and fixed-effects model has been made with the use of the F test, the Breusch-Pagan test and the Hausman test. Additionally, descriptive statistics and the Pearson correlation coefficients have been analyzed. The empirical studies were conducted in the period 2014?2019 among the 59 largest U.S. companies listed in the Fortune 500 ranking between 2015?2020. Findings & value added: The research hypothesis assuming the existence of positive relationship between corporate sustainability performance (CSP) at both aggregate and disaggregate levels and corporate financial performance (CFP) expressed by TR cannot be positively verified. It means that the improvement of corporate sustainability performance in environmental, social and governance dimensions does not lead to an increase in TR of a company, as some empirical studies suggest.

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References

2002Beyond the business case for corporate sustainability 2013The Impact of Corporate Social Responsibility on Firm Value: The Role of Customer Awareness 2007Stakeholder influence capacity and the variability of financial returns to corporate social responsibility 2009Is accounting for sustainability actually accounting for sustainability…and how would we know? An exploration of narratives of organisations and the planet 2012Does it pay to be really good? addressing the shape of the relationship between social and financial performance 2012How Corporate Social Responsibility Engagement Strategy Moderates the CSR–Financial Performance Relationship 2012Configuring management control systems: Theorizing the integration of strategy and sustainability 2011The Relationship Between Corporate Social Performance and Corporate Financial Performance in the Banking Sector

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