Research Article

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

  1. Dong-shang Chang*,
  2. Li-chin Regina Kuo

Article first published online: 14 JAN 2008

DOI: 10.1002/sd.351

Issue

Sustainable Development

Sustainable Development

Volume 16, Issue 6, pages 365–380, November/December 2008

Additional Information

How to Cite

Chang, D.-s. and Kuo, L.-c. R. (2008), The effects of sustainable development on firms' financial performance – an empirical approach. Sust. Dev., 16: 365–380. doi: 10.1002/sd.351

Author Information

  1. National Central University, Department of Business Administration, Jhongli City, Taiwan

*National Central University, Department of Business Administration, No. 300, Jhongda Road, Jhongli City, Taoyuan County 32001, Taiwan

  1. †

    The sustainability score is supplied by SAM Sustainable Asset Management. The views expressed in this paper are those of the authors and do not necessarily represent those of SAM Group. All the corporate sustainability indicators used in the present study have been independently elaborated by the authors of this article from the original data provided by SAM Group. Any possible error in the interpretation of such data remains the sole responsibility of the authors.

Publication History

  1. Issue published online: 21 NOV 2008
  2. Article first published online: 14 JAN 2008
  3. Manuscript Accepted: 14 NOV 2007
  4. Manuscript Revised: 13 NOV 2007
  5. Manuscript Received: 1 JUN 2007

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Keywords:

  • sustainable development;
  • financial;
  • performance;
  • structural model;
  • stakeholder engagement

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.

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