Sustainability Matter and Financial Performance of Companies

Carlos Lassala, Andreea Apetrei and Juan Sapena
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Carlos Lassala: Department of Corporate Finance, Faculty of Economics, University of Valencia, Avda de los Naranjos, s/n, E-46022 Valencia, Spain
Andreea Apetrei: Faculty of Economics and Business Administration, Catholic University of Valencia, Marquis of Campo Building, 34 Corona St, E-46003 Valencia, Spain
Juan Sapena: Faculty of Economics and Business Administration, Catholic University of Valencia, Marquis of Campo Building, 34 Corona St, E-46003 Valencia, Spain

Sustainability, 2017, vol. 9, issue 9, 1-16

Abstract: The relationship between social and environmental performance and financial performance in companies has been a subject widely debated in the literature but the results obtained to date are not conclusive. This research employs the fuzzy-set qualitative comparative analysis (fsQCA) and offers new evidence on the relationship between both types of performance in a sample of companies listed in the Spanish capital market. Financial performance is measured by the return on equity (ROE) ratio, variable that is widely used in Finance and Accounting related research. The corporate performance of the company is measured by its inclusion or not in the sustainability index used as reference for the Spanish capital market, the FTSEGood4 IBEX. The model also incorporates other business variables that might affect the relationships between both types of performance, such as return on assets (ROA) ratio, company size, debt ratio, and industry. The results suggest that, for specific industries, return on assets is a necessary condition for companies with leverage to reduce the cost of debt due to their sustainability profile and consequently boost their ROE.

Keywords: fsQCA; financial performance; sustainability; social and environmental performance; FTSE4Good IBEX (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (32)

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Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:9:y:2017:i:9:p:1498-:d:109365

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