*Corporate Sustainability Performance and Corporate Financial Performance—A Meta-Analysis Study

• In Event: Corporate Social Responsibility

Abstract

The relationship between corporate sustainability performance (CSP) and financial performance (CFP) has long been debated. Ullman (1985) pointed out that the conflicting results could be affected by many factors, such as sample size, industrial context, inconsistent measurement of CSP and CFP, research methodologies, and procedures for data collection and analysis. This paper addresses Ullman’s (1985) concerns by providing a more methodologically rigorous review of the CSP-CFP relationship than prior research studies. A meta-analysis of 198 studies yields a total sample size of 31,514 observations. The meta-analytic findings suggest that sustainability likely increases a firm’s financial performance, especially in the long run. Compared to social sustainability, environmental sustainability, to a larger extent, contributes to the positive CSP-CFP relationship. In addition, CSP appears to be more highly correlated with accounting-based measures of CFP than with market-based indicators. Non-U.S. sample firms, multi-industry, and pre-2000 studies seem to show a stronger impact on the positive relationship between CSP and CFP than other sample indicators. A final finding is that the methodology used in the analysis has a significant impact on the results.

Authors

• Wenxiang Lu, The University of Texas at Arlington

• Martin Edward Taylor, The University of Texas at Arlington