IDEAS home Printed from https://ideas.repec.org/a/blg/journl/v18y2023i1p367-377.html
   My bibliography  Save this article

A Sectoral-Based Approach To The Link Between Financial Performance And Sustainability

Author

Listed:
  • ȘERBAN Radu-Alexandru

    (Lucian Blaga University of Sibiu, Romania)

  • MIHAIU Diana Marieta

    (Lucian Blaga University of Sibiu, Romania)

  • HERCIU Mihaela

    (Lucian Blaga University of Sibiu, Romania)

  • OGREAN Claudia

    (Lucian Blaga University of Sibiu, Romania)

Abstract

The main objective of this paper is to analyze if there is a link between financial performance and sustainability in the case of listed companies on stock markets, worldwide, and across all sectors of activity because sustainability has become an important part of the company’s strategy. The financial performance of the companies was calculated using public financial data from the annual financial statements, while the environmental, social, and governance (ESG), and controversies scores were used as performance metrics for sustainability at company level. To evaluate financial performance a variety of indicators were used, such as assets management, debt management or market value performance, as a benchmark tool to compare the standing of companies in each sector of activity analyzed. Our findings showed that there are different relations (strong or weak) between financial performance and sustainability if a sectoral-based approach is considered. As a result, the link between financial performance and sustainability was tested on a sample of more than 5,000 companies divided into 10 sectors of activities, according to the Global Industry Classification Standard (GICS), for the period 2017-2021. The main conclusion of this study is that they are interrelated, capitalizing on each other.

Suggested Citation

  • ȘERBAN Radu-Alexandru & MIHAIU Diana Marieta & HERCIU Mihaela & OGREAN Claudia, 2023. "A Sectoral-Based Approach To The Link Between Financial Performance And Sustainability," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 18(1), pages 367-377, April.
    • Handle: RePEc:blg:journl:v:18:y:2023:i:1:p:367-377
    as

    Download full text from publisher

    File URL: http://magazines.ulbsibiu.ro/eccsf/RePEc/blg/journl/18120serban.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Biktimirov, Ernest N. & Afego, Pyemo N., 2022. "Do investors value environmental sustainability? Evidence from the FTSE Environmental Opportunities 100 index," Finance Research Letters, Elsevier, vol. 44(C).
    2. Gunnar Friede & Timo Busch & Alexander Bassen, 2015. "ESG and financial performance: aggregated evidence from more than 2000 empirical studies," Journal of Sustainable Finance & Investment, Taylor & Francis Journals, vol. 5(4), pages 210-233, October.
    3. Juhee Hwang & Hyuna Kim & Dongjin Jung, 2021. "The Effect of ESG Activities on Financial Performance during the COVID-19 Pandemic—Evidence from Korea," Sustainability, MDPI, vol. 13(20), pages 1-17, October.
    4. Michał Baran & Aneta Kuźniarska & Zbigniew J. Makieła & Anna Sławik & Magdalena M. Stuss, 2022. "Does ESG Reporting Relate to Corporate Financial Performance in the Context of the Energy Sector Transformation? Evidence from Poland," Energies, MDPI, vol. 15(2), pages 1-22, January.
    5. Changhong Zhao & Yu Guo & Jiahai Yuan & Mengya Wu & Daiyu Li & Yiou Zhou & Jiangang Kang, 2018. "ESG and Corporate Financial Performance: Empirical Evidence from China’s Listed Power Generation Companies," Sustainability, MDPI, vol. 10(8), pages 1-18, July.
    6. ȘERBAN Radu-Alexandru & HERCIU Mihaela, 2019. "Performance Management Systems – Proposing And Testing A Conceptual Model," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 14(1), pages 231-244, April.
    7. Radu-Alexandru Șerban & Diana Marieta Mihaiu & Mihai Țichindelean, 2022. "Environment, Social, and Governance Score and Value Added Impacts on Market Capitalization: A Sectoral-Based Approach," Sustainability, MDPI, vol. 14(4), pages 1-25, February.
    8. Sang Kim & Zhichuan (Frank) Li, 2021. "Understanding the Impact of ESG Practices in Corporate Finance," Sustainability, MDPI, vol. 13(7), pages 1-15, March.
    9. Guangyou Zhou & Lian Liu & Sumei Luo, 2022. "Sustainable development, ESG performance and company market value: Mediating effect of financial performance," Business Strategy and the Environment, Wiley Blackwell, vol. 31(7), pages 3371-3387, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Theerasak Nitlarp & Supaporn Kiattisin, 2022. "The Impact Factors of Industry 4.0 on ESG in the Energy Sector," Sustainability, MDPI, vol. 14(15), pages 1-19, July.
    2. Radu-Alexandru Șerban & Diana Marieta Mihaiu & Mihai Țichindelean, 2022. "Environment, Social, and Governance Score and Value Added Impacts on Market Capitalization: A Sectoral-Based Approach," Sustainability, MDPI, vol. 14(4), pages 1-25, February.
    3. Gianpaolo Iazzolino & Maria Elena Bruni & Stefania Veltri & Donato Morea & Giovanni Baldissarro, 2023. "The impact of ESG factors on financial efficiency: An empirical analysis for the selection of sustainable firm portfolios," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 30(4), pages 1917-1927, July.
    4. Guochao Wan & Ahmad Yahya Dawod, 2022. "ESG Rating and Northbound Capital Shareholding Preferences: Evidence from China," Sustainability, MDPI, vol. 14(15), pages 1-19, July.
    5. Chunya Ren & Irene Wei Kiong Ting & Wen‐Min Lu & Qian Long Kweh, 2022. "Nonlinear effects of ESG on energy‐adjusted firm efficiency: Evidence from the stakeholder engagement of apple incorporated," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 29(5), pages 1231-1246, September.
    6. Wu, Zihao & Gao, Jun & Luo, Chengdi & Xu, Hui & Shi, Guanqun, 2024. "How does boardroom diversity influence the relationship between ESG and firm financial performance?," International Review of Economics & Finance, Elsevier, vol. 89(PB), pages 713-730.
    7. Luigi Aldieri & Alessandra Amendola & Vincenzo Candila, 2023. "The Impact of ESG Scores on Risk Market Performance," Sustainability, MDPI, vol. 15(9), pages 1-16, April.
    8. Meles, Antonio & Salerno, Dario & Sampagnaro, Gabriele & Verdoliva, Vincenzo & Zhang, Jianing, 2023. "The influence of green innovation on default risk: Evidence from Europe," International Review of Economics & Finance, Elsevier, vol. 84(C), pages 692-710.
    9. Alena Kocmanová & Marie Pavláková Dočekalová & Tomáš Meluzín & Stanislav Škapa, 2020. "Sustainable Investing Model for Decision Makers (Based On Research of Manufacturing Industry in the Czech Republic)," Sustainability, MDPI, vol. 12(20), pages 1-27, October.
    10. Ariana Chang & Tian‐Shyug Lee & Hsiu‐Mei Lee, 2024. "Applying sustainable development goals in financial forecasting using machine learning techniques," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 31(3), pages 2277-2289, May.
    11. Tan, Yafei & Zhu, Zhaohui, 2022. "The effect of ESG rating events on corporate green innovation in China: The mediating role of financial constraints and managers' environmental awareness," Technology in Society, Elsevier, vol. 68(C).
    12. Dunbar, Kwamie & Treku, Daniel & Sarnie, Robert & Hoover, Jack, 2023. "What does ESG risk premia tell us about mutual fund sustainability levels: A difference-in-differences analysis," Finance Research Letters, Elsevier, vol. 57(C).
    13. Pompei MITITEAN & Nicoleta-Florina SĂRMAȘ, 2023. "The Relationship Between Sustainability Reporting and Corporate Performance. Evidence from the European Energy Sector," CECCAR Business Review, Body of Expert and Licensed Accountants of Romania (CECCAR), vol. 4(7), pages 49-59, July.
    14. Yan Zhao & Ehsan Elahi & Zainab Khalid & Xuegang Sun & Fang Sun, 2023. "Environmental, Social and Governance Performance: Analysis of CEO Power and Corporate Risk," Sustainability, MDPI, vol. 15(2), pages 1-18, January.
    15. Giovanni Cardillo & Ennio Bendinelli & Giuseppe Torluccio, 2023. "COVID‐19, ESG investing, and the resilience of more sustainable stocks: Evidence from European firms," Business Strategy and the Environment, Wiley Blackwell, vol. 32(1), pages 602-623, January.
    16. Monica Billio & Michele Costola & Iva Hristova & Carmelo Latino & Loriana Pelizzon, 2021. "Inside the ESG ratings: (Dis)agreement and performance," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 28(5), pages 1426-1445, September.
    17. Muhammad Azeem Qureshi & Minhas Akbar & Ahsan Akbar & Petra Poulova, 2021. "Do ESG Endeavors Assist Firms in Achieving Superior Financial Performance? A Case of 100 Best Corporate Citizens," SAGE Open, , vol. 11(2), pages 21582440211, June.
    18. Ibrahim Khalifa Elmghaamez & Jacinta Nwachukwu & Collins G. Ntim, 2024. "ESG disclosure and financial performance of multinational enterprises: The moderating effect of board standing committees," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(3), pages 3593-3638, July.
    19. Mărioara Beleneși & Victoria Bogdan & Dorina Nicoleta Popa, 2021. "Disclosure Dynamics and Non-Financial Reporting Analysis. The Case of Romanian Listed Companies," Sustainability, MDPI, vol. 13(9), pages 1-23, April.
    20. Jin Zhu & Fei Huang, 2023. "Transformational Leadership, Organizational Innovation, and ESG Performance: Evidence from SMEs in China," Sustainability, MDPI, vol. 15(7), pages 1-23, March.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:blg:journl:v:18:y:2023:i:1:p:367-377. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Mihaela Herciu (email available below). General contact details of provider: https://edirc.repec.org/data/feulbro.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.