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Sustainability Initiatives and Failure Risk of a Firm: How Are They Linked?

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  • Kertu Lääts

    (School of Economics and Business Administration, University of Tartu, 51009 Tartu, Estonia)

  • Oliver Lukason

    (School of Economics and Business Administration, University of Tartu, 51009 Tartu, Estonia)

Abstract

This paper studies the link between corporate sustainability and failure risk. The two competing hypotheses rely on the controversies in the theoretical and empirical literature linking sustainability and financial performance. Analysis of a sample of Estonian non-listed companies of all sizes indicates that firms engaged in more sustainability initiatives exhibit a higher risk of failure in the short run. The results remain robust for different sustainability initiatives and periods, while being exclusively determined by firms active locally, not on foreign markets.

Suggested Citation

  • Kertu Lääts & Oliver Lukason, 2022. "Sustainability Initiatives and Failure Risk of a Firm: How Are They Linked?," JRFM, MDPI, vol. 15(11), pages 1-14, October.
    • Handle: RePEc:gam:jjrfmx:v:15:y:2022:i:11:p:502-:d:956753
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    References listed on IDEAS

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    4. Torbjörn Tagesson & Veronica Blank & Pernilla Broberg & Sven‐Olof Collin, 2009. "What explains the extent and content of social and environmental disclosures on corporate websites: a study of social and environmental reporting in Swedish listed corporations," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 16(6), pages 352-364, November.
    5. Dimitras, A. I. & Zanakis, S. H. & Zopounidis, C., 1996. "A survey of business failures with an emphasis on prediction methods and industrial applications," European Journal of Operational Research, Elsevier, vol. 90(3), pages 487-513, May.
    6. Jae-Joon Han & Hyun Jeong Kim & Jeongmin Yu, 2016. "Empirical study on relationship between corporate social responsibility and financial performance in Korea," Asian Journal of Sustainability and Social Responsibility, Springer, vol. 1(1), pages 61-76, December.
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    Cited by:

    1. Aleksandar M. Damnjanovic & Vladimir Dimitrijevic & Sandra Nesic & Miroslav Miskic & Gordana Mrdak & Sinisa M. Arsic, 2023. "Risk Influence of Employee Productivity on Business Failure: Evidence Found in Serbian SMEs," Sustainability, MDPI, vol. 15(6), pages 1-17, March.

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