Determinants of corporate sustainability performance – evidence from Brazilian panel data

Abstract

Purpose Over the past two decades, there has been an increasing interest on corporate social responsibility by a number of constituencies – corporate managers, research scholars, policymakers and investors. In this context, corporate sustainability performance (CSP) has been a central focus of attention. This paper aims to analyze CSP determinants in Brazil, an important emerging market. Firm CSP is proxied by the membership to the Corporate Sustainability Index (ISE) which comprises environmental, social, economic and governance issues. Design/methodology/approach Logit panel data models are estimated for a sample of 2,685 firm-year observations in the period of 2006-2015. Findings Results show that firms operating in environmental risky industries tend to be leading CSP firms in Brazil which might be a positive consequence of the Brazilian environmental legislation that could be forcing such firms to be more committed to environmental issues. High ownership concentration reduces the probability of a firm’s membership to the ISE index signaling that large controlling blockholders may not see sustainability and governance concerns as relevant. Larger Brazilian firms and the ones with more growth opportunities tend to be CSP leaders. Additionally, the financial crisis of 2007-2009 had a negative effect on CSP in Brazil. Practical implications The implications of the present findings may be of interest to academics and firms’ stakeholders. The fact that firms from environmental risky industries exhibit higher concerns with CSP, probably because of the Brazilian environmental rules that has advanced in the past decades, show the prominence of policymakers in the critical scenario of environmental issues. When designing regulation, policymakers should be conscious of the importance of social issues and pay attention to all ways available to foster firm sustainability concerns. The additional evidence that dominant shareholders do not appear to see CSP as a relevant concern in Brazil points out an agency conflict in which large blockholders’ interests may be prevailing over other stakeholders’ interests. That is important to academics who study the role played by ownership structure on firm’s policies. Furthermore, larger firms, as well as the ones with more growth opportunities, seem to invest in CSP, possibly for seeing it as a way to generate competitive advantage. Originality/value As per the authors’ knowledge this is the first paper to point out the relevance of industry environmental sensitivity over firm’s commitment to sustainability issues in Brazil. Additional evidence is provided on the negative effect of ownership concentration on the probability of firm’s membership to the ISE sustainability index using a longer period as well as robust logit panel data model estimates compared to previous studies. Unlike previous works, the paper analyzes the complexity of a sustainability index in the Brazilian market. Such index comprises corporate social responsibility, sustainability and corporate governance concerns. This set of concerns makes it a complex index and requires a deeper rationale for the determinants of CSP as proxied by the membership to it, under the stakeholder and agency theoretical frameworks.

Poison pills e governança corporativa: um estudo no mercado acionário brasileiro

“…We used the cumulative percentage of voting shares held by the three top shareholders in relation to all of the voting shares as a proxy for ownership concentration (Crisóstomo et al, 2019), the natural logarithm of revenues as a proxy for firm size (Mallette & Fowler, 1992;Klapper & Love, 2004), return on equity as a proxy for performance (Mallette & Fowler, 1992;Darosi, 2014), the sum of fixed and variable compensation (without including stock options) as a proxy for executive compensation (Heron & Lie, 2006;Heron & Lie, 2015) and the ratio between total debt and total equity as a proxy for leverage (Comment & Schwert, 1995;.…”

“…The ownership structure is one of these differences, bearing in mind that unlike more developed economies, the Brazilian scenario is characterized mainly by companies with a high level of ownership concentration (Silva, Lana, & Marcon, 2018). However, as a result of an evolutionary process of capital markets, it has been verified that companies with dispersed control or reasonably dispersed control of shares have now appeared in the Brazilian stock market (Gorga, 2009;Sternberg, Leal, & Bortolon, 2011;Portulhak, Theiss, Kühl, & Colauto, 2017;Crisóstomo, Freire, & Freitas, 2019), making it possible for potential acquirers to try to take over a company. This evidence has been corroborated by hostile takeovers which have occurred in Brazil such as the offer of Sadia for control of Perdigão (Vieira, Martins, & Fávero, 2009), of Cromossomo Participações II for control of Diagnósticos da América (Diagnósticos da América S. A., 2014), of Sapore for control of the International Meal Company (International Meal Company S. A., 2018), and of Energisa for control of Eletropaulo (Eletropaulo Metropolitana Eletricidade de São Paulo S. A., 2018), among others.…”

A systematic literature review on corporate sustainability: contributions, barriers, innovations and future possibilities

“…Specifically, these practices are related to encouraging environmental innovation, redesigning consumers' offer, raising support for institutions and policy measures, and organizing synergetic involvement among stakeholders. In this same direction, Crisóstomo et al ( 2020 ) identify determinants for corporate sustainability performance. Within these determinants, there are: ownership concentration; companies from environmentally risky sectors; profitability; the firm's size; growth opportunities; and dept.…”

Does ESG Impact a Firm’s Sustainability Performance? The Mediating Effect of Firm Innovation Performance

“…Hussain, Rigoni [12] analyzed the performance of the triple bottom line to investigate the relationship between corporate governance and Sustainability Performance (SP) in US-based firms; Maali, Rakia [14] analyzed the mediating role of CSR on the relationship between corporate governance and sustainability performance in the UK; Yang, Du [15] investigated the impact of changes in clean energy, green financing and economic practices on sustainability performance through ESG performance in G7 countries; Kocmanová and Šimberová [16] studied the relationship between ESG indicators and sustainability performance in Czech companies; Ye, Song [17] explored the impact of ESG on sustainability performance, reflected as stock return, in EU members countries. Also, remarkable studies have been conducted to measure the impact of ESG performance on sustainability performance in emerging economies like China [9,18,19] , Brazil [20,21], Korea [22], India [23,24], etc. While some studies have also been conducted to address ESG and sustainability performance issues in Bangladesh, an emerging market [25][26][27], less emphasis has been given to exploring such issues in the manufacturing industry.…”