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The effects of sustainable development on firms' financial performance - an empirical approach

Author

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  • Dong-shang Chang

    (National Central University, Department of Business Administration, Jhongli City, Taiwan)

  • Li-chin Regina Kuo

    (National Central University, Department of Business Administration, Jhongli City, Taiwan)

Abstract

This research studies firms' sustainable development in term of economic, environmental and social dimensions and their financial performance, which includes a broader coverage of stakeholder engagement of both sustainability and profitability in a structural equation model (SEM). The secondary data of 311 firms' sustainability scores are analyzed and our observations reveal that (1) the better sustainability performers may have a tendency of positive influence on firm profitability in the same and later periods, (2) a positive reciprocal causality may exist between sustainability and profitability among the better sustainability group, (3) profitability affects corporate sustainability positively in both higher and lower sustainability groups and (4) sustainability influences firm profitability negatively in the lower sustainability group. Copyright © 2008 John Wiley & Sons, Ltd and ERP Environment.

Suggested Citation

  • Dong-shang Chang & Li-chin Regina Kuo, 2008. "The effects of sustainable development on firms' financial performance - an empirical approach," Sustainable Development, John Wiley & Sons, Ltd., vol. 16(6), pages 365-380.
  • Handle: RePEc:wly:sustdv:v:16:y:2008:i:6:p:365-380 DOI: 10.1002/sd.351
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    References listed on IDEAS

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    1. Salzmann, Oliver & Ionescu-somers, Aileen & Steger, Ulrich, 2005. "The Business Case for Corporate Sustainability:: Literature Review and Research Options," European Management Journal, Elsevier, vol. 23(1), pages 27-36, February.
    2. Bryan G. Norton & Michael A. Toman, 1997. "Sustainability: Ecological and Economic Perspectives," Land Economics, University of Wisconsin Press, vol. 73(4), pages 553-568.
    3. Catherine M. Paul & Donald Siegel, 2006. "Corporate social responsibility and economic performance," Journal of Productivity Analysis, Springer, vol. 26(3), pages 207-211, December.
    4. Eleonora Molnar & Peter Mulvihill, 2003. "Sustainability-focused Organizational Learning: Recent Experiences and New Challenges," Journal of Environmental Planning and Management, Taylor & Francis Journals, vol. 46(2), pages 167-176.
    5. Théophile AZOMAHOU & Phu NGUYEN VAN & Marcus WAGNER, 2001. "Determinants of Environmental and Economic Performance of Firms: An Empirical Analysis of the European Paper Industry," Working Papers of BETA 2001-22, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    6. Karen Palmer & Wallace E. Oates & Paul R. Portney, 1995. "Tightening Environmental Standards: The Benefit-Cost or the No-Cost Paradigm?," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 119-132, Fall.
    7. Jeremy Moon, 2007. "The contribution of corporate social responsibility to sustainable development," Sustainable Development, John Wiley & Sons, Ltd., vol. 15(5), pages 296-306.
    8. Wagner, Marcus & Schaltegger, Stefan, 2004. "The Effect of Corporate Environmental Strategy Choice and Environmental Performance on Competitiveness and Economic Performance:: An Empirical Study of EU Manufacturing," European Management Journal, Elsevier, vol. 22(5), pages 557-572, October.
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    Cited by:

    1. Nuttaneeya Torugsa & Wayne O’Donohue & Rob Hecker, 2013. "Proactive CSR: An Empirical Analysis of the Role of its Economic, Social and Environmental Dimensions on the Association between Capabilities and Performance," Journal of Business Ethics, Springer, vol. 115(2), pages 383-402, June.

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