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      Business sustainability performance and corporate financial performance: the mediating role of optimal investment

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      Managerial Finance
      Emerald

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          Abstract

          Purpose

          Employing a large sample consisting of 3,701 corporations domiciled in developed and emerging countries, this paper aims to analyze the mediating role of investment efficiency in the association between business sustainability performance and corporate financial performance.

          Design/methodology/approach

          Four different aspects of corporate sustainability offered by the ASSET4 database are used as proxies for business sustainability performance, including economic, corporate governance, social and environmental dimensions. In addition to these aspects, the aggregate measure of business sustainability performance is also employed. In order to test the association between business sustainability and corporate performance via investment efficiency, ordinary least squares, fixed-effect, random-effect and generalized method of moments statistical models were employed.

          Findings

          The results suggest that business sustainability performance is positively associated with corporate financial performance, indicating that sustainable corporations enjoy higher financial performance. Moreover, Sobel, Aroian and Goodman tests confirm that investment efficiency mediates the positive relationship between business sustainability performance and financial performance. Finally, further analyses show that the positive association between sustainability performance and investment efficiency is stronger for those firms headquartered in developed countries than in those located in emerging nations.

          Originality/value

          This paper contributes to the literature by investigating how growth opportunities advance the influence of business sustainability to corporate financial performance using a large sample from 43 countries.

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          Most cited references56

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          Theory of the firm: Managerial behavior, agency costs and ownership structure

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            Corporate financing and investment decisions when firms have information that investors do not have

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              Financing Constraints and Corporate Investment

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                Author and article information

                Contributors
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                Journal
                Managerial Finance
                MF
                Emerald
                0307-4358
                January 10 2022
                February 01 2022
                January 10 2022
                February 01 2022
                : 48
                : 2
                : 348-369
                Article
                10.1108/MF-01-2021-0040
                7a21a4c2-466d-4b16-968a-80962e5d407c
                © 2022

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