Interlinkage between corporate social, environmental performance and financial performance: Firm-mediators in a multi-country context

The current study explores the interlinkage between corporate social, environmental performance (CSP) and financial performance of a firm, mediated by its global exposure and corporate governance. We conduct a dynamic fixed effect 2SLS-IV analysis on a comprehensive multi -country data-set and find that financial performance is not significantly impacted by CSP but there is a positive influence when it is mediated by lower internationalization. We also find that a more independent board lowers such value-destroying managerial activities, while the presence of women directors on board, dampens that positive influence of low internationalisation in strengthening financial performance through higher CSP.

Automated summary

This study examines the relationship between corporate social and environmental performance (CSP) and financial performance, mediated by global exposure and corporate governance. Using a dynamic fixed effect 2SLS-IV analysis on a comprehensive multi-country dataset, we find that financial performance is not significantly affected by CSP alone, but there is a positive impact when it is mediated by lower internationalization. Additionally, a more independent board can reduce value-destroying managerial activities, while the presence of women directors weakens the positive influence of low internationalization on enhancing financial performance through higher CSP.