Role Reversal! Financial Performance as an Antecedent of ESG: The Moderating Effect of Total Quality Management

Nour Chams, Josep García-Blandón and Khaled Hassan
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Nour Chams: Center for Agro-Food Economics and Development (CREDA), University Polytechnic of Catalonia, 08860 Barcelona, Spain
Josep García-Blandón: IQS School of Management, Department of Economics and Finance, Ramon Llull University, 08017 Barcelona, Spain
Khaled Hassan: ESADE Business School, Department of Operations and Innovation, Ramon Llull University, 08712 Barcelona, Spain

Sustainability, 2021, vol. 13, issue 13, 1-18

Abstract: Shifting from short-term profit maximizing strategies to more sustainable long-term ones, the corporate world has been exerting extra effort to adopt environmental, social, and governance (ESG) performances. However, the loop question remains unsolved: is ESG financially-driven or is financial performance (FIN) ESG-driven? Building on the slack resources theory and bridging three management literatures, this analysis relies on a six-year panel dataset of multinational organizations from different industries. A distributed lag regression model is proposed to empirically investigate the impact of FIN performance on ESG and to test the moderator effect of total quality management (TQM). The findings reveal a stimulus effect between free cash flow (FCF) and ESG scores. While the interaction between TQM and FCF has a negative effect on ESG, the interaction between TQM and Tobin’s Q reveals a positive relationship with ESG. This study sheds further insights for both research and practice towards the operationalization of sustainability management.

Keywords: environmental; social; governance; financial performances; free cash flow; total quality management; cross-national analysis (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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