Corporate Sustainability Performance Over the Firm Life Cycle: Levels, Determinants, and the Impact on Accounting Performance

51 Pages Posted: 12 Dec 2017

See all articles by Jan Diebecker

Jan Diebecker

University of Muenster - Accounting Center

Christian Rose

University of Münster - Accounting Center Münster

Friedrich Sommer

University of Bayreuth

Date Written: December 8, 2017

Abstract

In this paper, we empirically investigate the levels and the determinants of corporate sustainability performance (CSP) in different stages of the firm life cycle, as well as the impact of CSP on accounting-based corporate financial performance (CFP). Based on an international sample of 26,902 firm-year observations for the period 2002 to 2014, we use Dickinson’s (2011) firm life cycle measure based on cash flow patterns, Thomson Reuters ESG Research Data (formerly known as ASSET4) as CSP proxy, and return on assets to proxy accounting performance. Drawing on stakeholder theory and the resource based view, we hypothesize and find that CSP differs significantly across the life cycle stages and is lower before and after the mature stage. Free funds available increase CSP during the growth, mature and the shake-out stages. This finding can be attributed to strategic differentiation efforts and also hints towards opportunistic management behavior, i.e., managers might pursue sustainability measures as discretionary investments to keep resources within their spheres of influence. Shareholder concentration reduces CSP in the introduction, growth, mature and shake-out stages. Combined with the results regarding free funds, this finding could be attributed to the limitation of discretionary spending. We find a significantly positive effect of CSP on CFP in the growth, mature and shake-out stages, giving impetus to the CSP business case.

Keywords: corporate sustainability performance, corporate social responsibility, firm life cycle, financial performance, accounting performance

JEL Classification: M41, G30, Q01

Suggested Citation

Diebecker, Jan and Rose, Christian and Sommer, Friedrich, Corporate Sustainability Performance Over the Firm Life Cycle: Levels, Determinants, and the Impact on Accounting Performance (December 8, 2017). Available at SSRN: https://ssrn.com/abstract=3084601 or http://dx.doi.org/10.2139/ssrn.3084601

Jan Diebecker

University of Muenster - Accounting Center ( email )

Universitätsstr. 14-16
Münster, 48143
Germany

Christian Rose

University of Münster - Accounting Center Münster ( email )

Universitätsstraße 14-16
Münster, 48143
Germany

Friedrich Sommer (Contact Author)

University of Bayreuth ( email )

Universitatsstr 30
Bayreuth, D-95447
Germany

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