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Nexus between corporate sustainability and financial performance
Högskolan i Halmstad, Akademin för företagande, innovation och hållbarhet.ORCID-id: 0000-0003-0386-6574
2023 (engelsk)Doktoravhandling, med artikler (Annet vitenskapelig)
Abstract [en]

To save the planet from previous devastating corporate actions, corporations have enormous responsibilities toward the environment, economy and society. Implementing corporate sustainability practices through establishing effective governance mechanisms can be considered a transformative initiative with potential implications for social and green innovation. Social and green innovation thus shifts companies’ focus from for-profit objectives to the creation of mutual benefit and shared values.

Over the past four decades, extensive academic research has been conducted on the topic of corporate sustainability and financial performance. Therefore, conducting research on a similar topic might appear to the reader to be carrying coal to Newcastle. However, the aim of this thesis is not to reproduce previous studies but rather to address the following research question:  

What is the nexus between corporate sustainability and financial performance? 

This thesis identifies that previous literature has produced blended results when explaining the nexus between corporate sustainability and financial performance; they have asserted that firms are solely responsible for sustainability activities and thus financial performance. In this regard, previous literature has argued for institutional pressure and legitimacy requirements to shape corporate behavior. However, I contradict the views of previous scholars and argue that power distance and hierarchy always hamper the relationship. I further posit that corporations are not solely responsible for sustainability activities and thus financial performance. Rather, the nexus between corporate sustainability and financial performance is transformed, modified, and shaped through an interaction of the trajectories of multiple actors, an interaction that I was able to capture through the multi-theoretical approach. In this regard, I propose a comprehensive framework, that is effective under a macro business ecosystem. With this framework, companies that prioritize sustainability strategies would eventually ensure financial performance but after a time lag. In contrast, companies that engage in greenwashing and selfies will always achieve misleading outcomes.

The appended articles further examine the nexus between corporate sustainability and financial performance empirically using data from European countries by applying several static and dynamic econometric models under different time spans. The overall empirical result suggests that corporate sustainability practices have a positive impact on financial performance but with a time lag. However, in order to ensure durable long-term corporate sustainability practices, the macro and micro business environments – a network governance relationship – play a crucial role. The consistent and empirically robust results reveal the multiple trajectories of the nexus between corporate sustainability and financial performance. Therefore, the thesis disseminates key messages to policymakers and practitioners about the importance of an effective network governance mechanism.

sted, utgiver, år, opplag, sider
Halmstad: Halmstad University Press, 2023. , s. 182
Serie
Halmstad University Dissertations ; 105
Emneord [en]
sustainability, performance, profitability, corporate responsibility, ESG, multi-theoretical approach, macroeconomic factors, microeconomic factors, women on boards, board composition, sustainable development
HSV kategori
Identifikatorer
URN: urn:nbn:se:hh:diva-52131ISBN: 978-91-89587-24-3 (tryckt)ISBN: 978-91-89587-23-6 (digital)OAI: oai:DiVA.org:hh-52131DiVA, id: diva2:1815375
Disputas
2024-01-29, S1080, hus S, Kristian IV:s väg 3, Halmstad, 10:15 (engelsk)
Opponent
Veileder
Tilgjengelig fra: 2023-11-29 Laget: 2023-11-28 Sist oppdatert: 2023-11-29bibliografisk kontrollert
Delarbeid
1. Corporate sustainability and financial performance: A hybrid literature review
Åpne denne publikasjonen i ny fane eller vindu >>Corporate sustainability and financial performance: A hybrid literature review
2023 (engelsk)Inngår i: Corporate Social Responsibility and Environmental Management, ISSN 1535-3958, E-ISSN 1535-3966Artikkel, forskningsoversikt (Fagfellevurdert) Epub ahead of print
Abstract [en]

The discussion of “whether it pays to be green” is ongoing. This review does not intend to solve the debate, rather it soothes it by contributing to the concept of “when it pays to be green.” By focusing on the shortcomings of existing literature reviews on the topic of corporate sustainability and financial performance (CSFP) in this hybrid review, issues were identified that had been overlooked earlier. In general, CSFP holds a positive relationship but in a time lag. Nonconclusive results about the relationship within CSFP are due to self-selection bias, endogeneity issues, and the use of multiple datasets and industry categories. Surprisingly, we also discovered that the impact of sustainability on financial performance is elusive in capitalist countries considered to be economically rational. Institutional and legitimacy requirements are a good starting point for shaping corporate behaviors in the short term; however, they might not be equally appropriate in the long term in cases when corporations shift operations to pollution havens. A multifaceted, synergistic interaction between governmental institutions, corporations, and other stakeholders is required—without imposing authority—to ensure durable sustainable development. © 2023 The Authors. Corporate Social Responsibility and Environmental Management published by ERP Environment and John Wiley & Sons Ltd.

sted, utgiver, år, opplag, sider
Oxford: John Wiley & Sons, 2023
Emneord
bibliometric analysis, corporate performance, corporate responsibility, CSR, ESG, financial performance, literature review, stakeholder engagement, sustainability, sustainable development
HSV kategori
Identifikatorer
urn:nbn:se:hh:diva-51638 (URN)10.1002/csr.2600 (DOI)001060666600001 ()2-s2.0-85169055193 (Scopus ID)
Tilgjengelig fra: 2023-09-14 Laget: 2023-09-14 Sist oppdatert: 2024-02-06bibliografisk kontrollert
2. Do sustainability practices influence financial performance? Evidence from the Nordic financial industry
Åpne denne publikasjonen i ny fane eller vindu >>Do sustainability practices influence financial performance? Evidence from the Nordic financial industry
2022 (engelsk)Inngår i: Accounting Research Journal, ISSN 1030-9616, E-ISSN 1839-5465, Vol. 35, nr 2, s. 292-314Artikkel i tidsskrift (Fagfellevurdert) Published
Abstract [en]

Purpose: The purpose of this study is to explore the impact of sustainability (environmental, social and governance or ESG) practices on the financial performance (FP) of the Nordic financial industry. Design/methodology/approach: The study covers a sample selection of observations for a total of 152 firm-years for 39 financial companies within the Nordic region (Sweden, Denmark, Finland and Norway) for the business years including 2015–2019. Data regarding ESG and FP indicators were extracted from the Thomson Reuters Eikon database in July 2020. This is a quantitative study using regression and a generalized method of moments. Findings: Using static and dynamic estimators, the authors found both positive and negative impacts of sustainability practice on FP. The authors identified a negative relationship between ESG practices and FP (return on invested capital, return on equity and earnings per share). The authors identified a positive relationship between governance and return on assets. Originality/value: A key contribution to the accounting literature is the finding that there is a risk for financial firms in adopting sustainability practices, as they follow a logic that contradicts the purely economic rationale. On the other hand, the positive relationship between governance and FP helps not only companies but also regulators and researchers to understand the positive impact of a good governance structure. © 2021, ABM Fazle Rahi, Ruzlin Akter and Jeaneth Johansson.

sted, utgiver, år, opplag, sider
Bingley: Emerald Group Publishing Limited, 2022
Emneord
Corporate social responsibility, ESG, Financial industry, Nordic financial companies, Performance, Profitability
HSV kategori
Identifikatorer
urn:nbn:se:hh:diva-46007 (URN)10.1108/ARJ-12-2020-0373 (DOI)000685829000001 ()2-s2.0-85113316869 (Scopus ID)
Prosjekter
Hållbart värdeskapande genom cirkulära affärsmodeller
Forskningsfinansiär
Swedish Agency for Economic and Regional Growth
Tilgjengelig fra: 2021-12-02 Laget: 2021-12-02 Sist oppdatert: 2024-02-06bibliografisk kontrollert
3. Reinventing the wheel? Factors influencing relationship: links between sustainability and financial performance. European evidence
Åpne denne publikasjonen i ny fane eller vindu >>Reinventing the wheel? Factors influencing relationship: links between sustainability and financial performance. European evidence
2024 (engelsk)Inngår i: International Journal of Accounting and Information Management, ISSN 1834-7649, E-ISSN 1758-9037, Vol. 32, nr 1, s. 147-177Artikkel i tidsskrift (Fagfellevurdert) Published
Abstract [en]

Purpose: This study aims to examine the factors that influence the relationship between sustainability and financial performance (FP) of the European listed companies.Design/methodology/approachThis study analyzed data from 795 companies in 21 European countries by applying linear mixed-effects multilevel regressions, a two steps system generalized method of moments and quantile regression models to uncover the links between sustainability and FP.

Findings: The past four decades have witnessed abundant research to determine the relationship between corporate sustainability and FP. Thus, conducting further research in 2023 could be seen as “reinventing the wheel.” Yet, earlier research considered firms as isolated entities with sustainability and FP being dependent only on that firm’s actions. By contrast, with the help of network governance theory, this study shows that a firm’s sustainability and FP depend on an interplay among interorganizational actors, such as institutional qualities, macroeconomic factors and an embrace of sustainability. Here, large firms play an essential role. Three significant findings are drawn. First, sustainability performance has a significant impact on FP in the European context. Second, the institutional quality (IQ) of the rule of law and control of corruption plays a crucial role in enhancing sustainability and FP, and finally the interaction of IQ and economic growth helps to increase companies’ market value (Tobin’s Q). The consistent and empirically robust findings offer key lessons to policymakers and practitioners on the interplay among multiple actors in corporate sustainability and FP.

Practical implications: A synergetic multifaced relationship between governmental institutions and corporations is inevitable for ensuring sustainable development. The degree of intimacy in the relationship, of course, will be determined by the macroeconomic environment.

Originality/value: In this research, this study theoretically and empirically identified that corporate sustainability and FP are not solely dependent on corporate operation. Rather, it is transformed, modified and shaped through an interaction of multiple actors’ trajectories in the macro business environment. © 2023, ABM Fazle Rahi, Jeaneth Johansson and Catherine Lions.

sted, utgiver, år, opplag, sider
Bingley: Emerald Group Publishing Limited, 2024
Emneord
Sustainability, Financial performance, Network governance theory, Institutional quality, Corporate responsibility
HSV kategori
Identifikatorer
urn:nbn:se:hh:diva-52126 (URN)10.1108/ijaim-02-2023-0023 (DOI)001108351700001 ()2-s2.0-85178256297 (Scopus ID)
Tilgjengelig fra: 2023-11-27 Laget: 2023-11-27 Sist oppdatert: 2024-01-17bibliografisk kontrollert
4. Unpacking women’s power on boards. Gender reward in board composition
Åpne denne publikasjonen i ny fane eller vindu >>Unpacking women’s power on boards. Gender reward in board composition
2022 (engelsk)Konferansepaper, Oral presentation only (Annet vitenskapelig)
Abstract [en]

Participation of women on boards has long been a topic of debate in academia and practice. Yet, the threshold of women's participation in a board to obtain a synergetic impact on sustainable performance remains to be examined. Data from 21 European countries having 4661 firm-years of observation, this study revealed that women on boards positively affect sustainable performance in the European context, with approximately 30% participation by women on boards ensuring synergetic impact. To reach a conclusion, this study employs both static and dynamic models; thus, the finding is consistent and empirically robust.

Emneord
Women on boards, sustainable performance, gender reward, board composition, ESG
HSV kategori
Identifikatorer
urn:nbn:se:hh:diva-46714 (URN)
Konferanse
NORSI Research School Conference, Oslo, Norway, 21-22 of April, 2022
Tilgjengelig fra: 2022-04-27 Laget: 2022-04-27 Sist oppdatert: 2024-02-06bibliografisk kontrollert

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