Business sustainability performance and corporate financial performance: the mediating role of optimal investment

Ehsan Poursoleyman · Gholamreza Mansourfar · Saeid Homayoun · Zabihollah Rezaee

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Corporate Social Responsibility Reporting Corporate Finance and Governance Sustainable Finance and Green Bonds

Abstract

Purpose Employing a large sample consisting of 3,701 corporations domiciled in developed and emerging countries, this paper aims to analyze the mediating role of investment efficiency in the association between business sustainability performance and corporate financial performance. Design/methodology/approach Four different aspects of corporate sustainability offered by the ASSET4 database are used as proxies for business sustainability performance, including economic, corporate governance, social and environmental dimensions. In addition to these aspects, the aggregate measure of business sustainability performance is also employed. In order to test the association between business sustainability and corporate performance via investment efficiency, ordinary least squares, fixed-effect, random-effect and generalized method of moments statistical models were employed. Findings The results suggest that business sustainability performance is positively associated with corporate financial performance, indicating that sustainable corporations enjoy higher financial performance. Moreover, Sobel, Aroian and Goodman tests confirm that investment efficiency mediates the positive relationship between business sustainability performance and financial performance. Finally, further analyses show that the positive association between sustainability performance and investment efficiency is stronger for those firms headquartered in developed countries than in those located in emerging nations. Originality/value This paper contributes to the literature by investigating how growth opportunities advance the influence of business sustainability to corporate financial performance using a large sample from 43 countries.

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References

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