Sustainability factors influence on high and low performing firms

Al Habsi, Mouza Saud Ali

Abstract

Although shareholder theory emphasizes that firm’s actions and inactions are to maximize profit and owner’s wealth, firms have increased engage in activities that are not directly increase shareholder’s value. The thesis examines the impact of sustainability performance on firms’ performance in terms of financial health and market value. It compares two groups of companies, those with High and Low corporate social responsibility scores in Kinder, Lydenberg and Domini (KLD) database.
The results show that there is positive impact of current/lagged sustainability performance on firm market value for both groups. For the High group, the social dimension was found to have positive impacts with firm financial health (financial distress), while the Low group showed insignificant findings. It also examines the impact of firm performance (current and lagged) on sustainability performance. It found that firm performance has more impact on sustainability performance than the opposite. Lagged financial health has more impact than current firm financial health for both groups. Current/lagged market value shows the same results for the High group. While for Low group, the current market value showed more impact than for lagged market value.
The most activities that appeared to have significant relations are community, employee relations, environment, product, corporate governance, and diversity. However, diversity showed unexpected findings as it was seen to have a positive relation with financial distress, and a negative relation with market value. Moreover for the pathways that were significant in both groups the results showed that the relations were stronger in Low firms than in High firms. Therefore, whatever the group, firms are encouraged to implement sustainability activities as long as the costs do not exceed the benefits.

Citation

Al Habsi, M. S. A. (2017). Sustainability factors influence on high and low performing firms. (Thesis). University of Hull. Retrieved from https://hull-repository.worktribe.com/output/4224055

• Thesis Type: Thesis
• Deposit Date: Mar 24, 2022
• Publicly Available Date: Feb 24, 2023
• Keywords: Business
• Public URL: https://hull-repository.worktribe.com/output/4224055
• Additional Information: Business School, The University of Hull
• Award Date: Mar 1, 2017