Relationship between Sustainable Management Activities and Financial Performance: Mediating Effects of Non-Financial Performance and Moderating Effects of Institutional Environment

Yuhan Liu, Choo Yeon Kim, Eun Hwa Lee and Jae Wook Yoo
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Yuhan Liu: College of Business Administration, Konkuk University, Seoul 05029, Korea
Choo Yeon Kim: College of Business Administration, Konkuk University, Seoul 05029, Korea
Eun Hwa Lee: College of Business Administration, Konkuk University, Seoul 05029, Korea
Jae Wook Yoo: College of Business Administration, Konkuk University, Seoul 05029, Korea

Sustainability, 2022, vol. 14, issue 3, 1-26

Abstract: The importance of corporate responsibility for society and environments is emphasized by increasing influence of firms on various stakeholders. Firms strengthen environmental, social, and governance (ESG) activities, which are critical elements for sustainable management. However, there are inconsistent findings on the relationship between ESG activities and firms’ financial performance in prior studies because of the lack of full consideration of internal mechanisms and external conditions. To overcome this limitation, this study investigates the mediating effect of non-financial performance and the moderating effect of the institutional environment on the relationship between firms’ ESG activities and their financial performance in a unified moderated mediation model. Samples for empirical analyses were collected by a survey from 304 small and medium-sized Chinese manufacturers. The results of a mediation analysis reveal that each ESG activity has a positive effect on firms’ financial performance, and the impact of ESG activities on financial performance is completely mediated by non-financial performance. The results of a moderated mediation analysis further indicate that the mediating effect varies depending on the level of institutional pressure from the government, consumers, and competitors. The study suggests the need for interdisciplinary research in sustainable management and institutional theory and emphasizes the importance of sustainable management for performance improvement in a changing environment.

Keywords: sustainable management; ESG activities; institutional environment; non-financial performance; financial performance (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (4)

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