Business sustainability performance and corporate financial performance: the mediating role of optimal investment
ISSN: 0307-4358
Article publication date: 10 January 2022
Issue publication date: 1 February 2022
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.
Keywords
Acknowledgements
The authors would like to thank the editor and two anonymous reviewers for constructive comments.
Funding: The authors received no financial support for the research, authorship, and/or publication of this article.
Citation
Poursoleyman, E., Mansourfar, G., Homayoun, S. and Rezaee, Z. (2022), "Business sustainability performance and corporate financial performance: the mediating role of optimal investment", Managerial Finance, Vol. 48 No. 2, pp. 348-369. https://doi.org/10.1108/MF-01-2021-0040
Publisher
:Emerald Publishing Limited
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