IDEAS home Printed from https://ideas.repec.org/a/gam/jjrfmx/v16y2023i10p435-d1254304.html
   My bibliography  Save this article

American Corporate Sustainability and Extra-Financial Performance: Is There an Inverted-U Relationship

Author

Listed:
  • Nahed Zghidi

    (Commercial High School of Sfax, University of Sfax, Airport Road Km 4.5, BP 1081, Sfax 3018, Tunisia)

  • Rihab Bousnina

    (Faculty of Economics and Management of Sfax, University of Sfax, Airport Road Km 4, BP 1088, Sfax 3018, Tunisia)

  • Samarkand Mokni

    (Faculty of Economics and Management of Sfax, University of Sfax, Airport Road Km 4, BP 1088, Sfax 3018, Tunisia)

Abstract

In this paper, we explore the nexus between extra-financial performance (sustainable ESG) and firm performance within a sample of American firms from different vital sectors. In particular, we examine whether extra-financial performance has an effect on company performance. To this end, we have used a non-linear model. The study is based on a sample of 93 American companies over the period 2010–2019. We find that the association between extra-financial performance and firms’ financial performance is nonlinear, exhibiting an inverted U-shaped pattern. In particular, the results emphasize the importance of caution when pursuing ESG initiatives. Enterprise managers should monitor the effect of ESG activities on extra-financial performance and confirm the ESG threshold of their organization.

Suggested Citation

  • Nahed Zghidi & Rihab Bousnina & Samarkand Mokni, 2023. "American Corporate Sustainability and Extra-Financial Performance: Is There an Inverted-U Relationship," JRFM, MDPI, vol. 16(10), pages 1-18, October.
    • Handle: RePEc:gam:jjrfmx:v:16:y:2023:i:10:p:435-:d:1254304
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/1911-8074/16/10/435/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/1911-8074/16/10/435/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Jo Thori Lind & Halvor Mehlum, 2010. "With or Without U? The Appropriate Test for a U‐Shaped Relationship," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 72(1), pages 109-118, February.
    2. Milton Friedman, 1962. "The Interpolation of Time Series by Related Series," NBER Books, National Bureau of Economic Research, Inc, number frie62-1, March.
    3. Dyck, Alexander & Lins, Karl V. & Roth, Lukas & Wagner, Hannes F., 2019. "Do institutional investors drive corporate social responsibility? International evidence," Journal of Financial Economics, Elsevier, vol. 131(3), pages 693-714.
    4. Sarkis, Joseph & Cordeiro, James J., 2001. "An empirical evaluation of environmental efficiencies and firm performance: Pollution prevention versus end-of-pipe practice," European Journal of Operational Research, Elsevier, vol. 135(1), pages 102-113, November.
    5. Sandra A. Waddock & Samuel B. Graves, 1997. "The Corporate Social Performance–Financial Performance Link," Strategic Management Journal, Wiley Blackwell, vol. 18(4), pages 303-319, April.
    6. Preston, Lee E. & Sapienza, Harry J., 1990. "Stakeholder management and corporate performance," Journal of Behavioral Economics, Elsevier, vol. 19(4), pages 361-375.
    7. Olaf Weber, 2014. "Environmental, Social and Governance Reporting in China," Business Strategy and the Environment, Wiley Blackwell, vol. 23(5), pages 303-317, July.
    8. Doorman, Frans, 1990. "A social science contribution to applied agricultural research for the small farm sector: The diagnostic case study as a tool for problem identification," Agricultural Systems, Elsevier, vol. 32(3), pages 273-290.
    9. Goss, Allen & Roberts, Gordon S., 2011. "The impact of corporate social responsibility on the cost of bank loans," Journal of Banking & Finance, Elsevier, vol. 35(7), pages 1794-1810, July.
    10. Milton Friedman, 1962. "Introduction to "The Interpolation of Time Series by Related Series"," NBER Chapters, in: The Interpolation of Time Series by Related Series, pages 1-3, National Bureau of Economic Research, Inc.
    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. Wang, Kai & Li, Tingting & San, Ziyao & Gao, Hao, 2023. "How does corporate ESG performance affect stock liquidity? Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 80(C).
    2. Lei Zheng & Xuemeng Guo & Libin Zhao, 2021. "How Does Transportation Infrastructure Improve Corporate Social Responsibility? Evidence from High-Speed Railway Openings in China," Sustainability, MDPI, vol. 13(11), pages 1-23, June.
    3. Ahmad Yuosef Alodat & Yunhong Hao, 2025. "Environmental, social and governance (ESG) disclosure and firm performance: Moderating role of board gender diversity and sustainability committee," Sustainable Development, John Wiley & Sons, Ltd., vol. 33(1), pages 636-651, February.
    4. Chowdhury, Hasibul & Hodgson, Allan & Hasan, Mostafa Monzur, 2022. "Does a competitive external labour market affect corporate social responsibility? Evidence from industry tournament incentives," Journal of Behavioral and Experimental Finance, Elsevier, vol. 33(C).
    5. Hans B. Christensen & Luzi Hail & Christian Leuz, 2021. "Mandatory CSR and sustainability reporting: economic analysis and literature review," Review of Accounting Studies, Springer, vol. 26(3), pages 1176-1248, September.
    6. Li, WeiWei & Padmanabhan, Prasad & Huang, Chia-Hsing, 2024. "ESG and debt structure: Is the nature of this relationship nonlinear?," International Review of Financial Analysis, Elsevier, vol. 91(C).
    7. Safiullah, Md & Phan, Dinh Hoang Bach & Nurul Kabir, Md., 2024. "Green innovation and corporate default risk," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 95(C).
    8. Sudipta Bose & Chuan Yu, 2023. "Does Earnings Quality Influence Corporate Social Responsibility Performance? Empirical Evidence of the Causal Link," Abacus, Accounting Foundation, University of Sydney, vol. 59(2), pages 493-540, June.
    9. Hyejin Park & Jiyoon Lee & Jewon Shin, 2024. "How Does Taxation Affect Corporate Social Responsibility? Evidence from a Korean Tax Reform," Journal of Business Ethics, Springer, vol. 192(4), pages 745-774, July.
    10. Othar Kordsachia, 2021. "A risk management perspective on CSR and the marginal cost of debt: empirical evidence from Europe," Review of Managerial Science, Springer, vol. 15(6), pages 1611-1643, August.
    11. Hu, Haoshen & Lazar, Emese & Pan, Jingqi & Wang, Shixuan, 2024. "Environmental performance and credit ratings: A transatlantic study," International Review of Financial Analysis, Elsevier, vol. 96(PB).
    12. Fullerton, Thomas M. & Jiménez, Alan A. & Walke, Adam G., 2015. "An econometric analysis of retail gasoline prices in a border metropolitan economy," The North American Journal of Economics and Finance, Elsevier, vol. 34(C), pages 450-461.
    13. Barnett, William A. & Su, Liting, 2017. "Data sources for the credit-card augmented Divisia monetary aggregates," Research in International Business and Finance, Elsevier, vol. 39(PB), pages 899-910.
    14. Zadrozny, Peter A., 2016. "Extended Yule–Walker identification of VARMA models with single- or mixed-frequency data," Journal of Econometrics, Elsevier, vol. 193(2), pages 438-446.
    15. de Haen, H. & von Braun, J., 1977. "Regionale Veränderungen des Arbeitseinsatzes in der Landwirtschaft – Demographische Analyse und arbeitsmarktpolitische Schlussfolgerungen," Proceedings “Schriften der Gesellschaft für Wirtschafts- und Sozialwissenschaften des Landbaues e.V.”, German Association of Agricultural Economists (GEWISOLA), vol. 14.
    16. Al-Shaer, Habiba & Uyar, Ali & Kuzey, Cemil & Karaman, Abdullah S., 2023. "Do shareholders punish or reward excessive CSR engagement? Moderating effect of cash flow and firm growth," International Review of Financial Analysis, Elsevier, vol. 88(C).
    17. Thomas M. FULLERTON & Miguel MARTINEZ & Wm. Doyle SMITH & Adam WALKE, 2015. "Inflationary Dynamics in Guatemala," Journal of Economics and Political Economy, KSP Journals, vol. 2(4), pages 436-444, December.
    18. Iftekhar Hasan & Panagiotis Karavitis & Pantelis Kazakis & Woon Sau Leung, 2025. "Corporate Social Responsibility and Profit Shifting," European Accounting Review, Taylor & Francis Journals, vol. 34(1), pages 1-29, January.
    19. Bai Xue & Zhuang Zhang & Pingli Li, 2020. "Corporate environmental performance, environmental management and firm risk," Business Strategy and the Environment, Wiley Blackwell, vol. 29(3), pages 1074-1096, March.
    20. María Luisa Pajuelo Moreno & Teresa Duarte-Atoche, 2019. "Relationship between Sustainable Disclosure and Performance—An Extension of Ullmann’s Model," Sustainability, MDPI, vol. 11(16), pages 1-33, August.

    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:gam:jjrfmx:v:16:y:2023:i:10:p:435-:d:1254304. 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: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    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.