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Does external uncertainty matter in corporate sustainability performance?

Citation

Jia, J and Li, Z, Does external uncertainty matter in corporate sustainability performance?, Journal of Corporate Finance, 65 pp. 1-23. ISSN 0929-1199 (2020) [Refereed Article]

Copyright Statement

2020 Elsevier B.V. All rights reserved.

DOI: doi:10.1016/j.jcorpfin.2020.101743

Abstract

Motivated by the prevalence of corporate sustainability and the rise of uncertainty at the national level, we investigate the impact of three sources of uncertainty; namely, economic policy, climate change, and political instability, on firms' sustainability performance. Using a sample of 6804 firms from 72 countries spanning 15 years, our study revealed that uncertainty due to climate change, economic policy, and political instability negatively affects firms' sustainability performance. This finding is in line with the real options theory that uncertainty in an external environment discourages firms' long-term investment (e.g. investment in corporate sustainability). In addition, the results show that the option for delay in sustainability investment moderated the relation between uncertainty at the national level and firms' sustainability performance. Firms with better sustainability performance had higher firm value when facing uncertainty. Interestingly, firms with higher profitability performed better in sustainability when facing uncertainty at the national level.

Item Details

Item Type:Refereed Article
Keywords:climate change, corporate sustainability, economic policy uncertainty, political instability, uncertainty
Research Division:Commerce, Management, Tourism and Services
Research Group:Accounting, auditing and accountability
Research Field:Sustainability accounting and reporting
Objective Division:Information and Communication Services
Objective Group:Environmentally sustainable information and communication services
Objective Field:Environmentally sustainable information and communication services not elsewhere classified
UTAS Author:Jia, J (Dr Jing Jia)
ID Code:141420
Year Published:2020
Deposited By:TSBE
Deposited On:2020-10-19
Last Modified:2020-12-18
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