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A special issue of Sustainability (ISSN 2071-1050). This special issue belongs to the section "Economic and Business Aspects of Sustainability".

Deadline for manuscript submissions: closed (31 March 2022) | Viewed by 42371

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Special Issue Editors

Prof. Dr. Thomas J. Walker

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Guest Editor

Emerging Risks Information Center, Department of Finance, Concordia University, Montreal, QC H3G 1M8, Canada
Interests: risk management; corporate sustainability; responsible investing; climate finance; corporate governance; securities litigation and regulation; insider trading; venture capital

Prof. Dr. Jane McGaughey

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Guest Editor

School of Irish Studies, Concordia University, Montreal, QC H3G 1M8, Canada
Interests: diaspora studies; sustainable governance; mass migration; political extremism

Special Issue Information

Dear Colleagues,

Sustainable corporate finance is a fast growing research area that aims to link sustainability considerations, such as environmental, social, and governance (ESG) factors with financial decision making processes. In particular, it explores how corporate finance concepts such as capital budgeting decision criteria, the weighted average cost of capital, the cost of debt, and the cost of equity – to name a few – can and should be adjusted when a firm considers not just the financial cash flows associated with a given project, but the true cost of the project that addresses potential future liabilities, asset stranding, operational disruptions as well as potential environmental and societal damages emanating from a firm’s investment decisions.

This Special Issue seeks contributions that offer groundbreaking insights in the area of green finance, responsible investing, responsible corporate governance, institutional monitoring, as well as related political issues, such as mandatory sustainability disclosures, emissions trading schemes, and the role of local and diasporic citizen involvement/activism.

The guest editors invite contributions from the international community of scholars and practitioners that work at the interface of finance, economics, investment management, community development, philanthropy, policymaking, and social entrepreneurship. In particular, the guest editors encourage contributions that are a) transdisciplinary in their approaches, b) incorporate new concepts or tools beyond the academic fields of finance, entrepreneurship, economics, and political science, c) move beyond optimizing and improving existing corporate finance tools and practices, d) present experimental approaches or concepts that are yet to be applied, and e) use case studies or comparative studies.

Prof. Dr. Thomas J. Walker
Prof. Dr. Jane McGaughey
Guest Editors

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Keywords

sustainable corporate governance
sustainable management
environmental, social, and governance (ESG) considerations in corporate leadership
green finance
stranded assets
green bonds
impact investing
sustainability reports
true project financing

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Published Papers (11 papers)

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Research

25 pages, 1769 KiB

Open AccessArticle

Sustainable Financing Efficiency and Environmental Value in China’s Energy Conservation and Environmental Protection Industry under the Double Carbon Target

by Baohong Li, Yingdong Huo and Shi Yin

Sustainability 2022, 14(15), 9604; https://doi.org/10.3390/su14159604 - 4 Aug 2022

Cited by 19 | Viewed by 2660

Abstract

Difficulty in financing and low financing efficiency is one of the bottlenecks that restrict the high-quality development of China’s energy-saving and environmental protection industry and economy. The key to improving financing efficiency is to understand its influencing factors. This paper uses data envelopment analysis (DEA) and the Malmquist index to measure the overall financing efficiency and the efficiency of different financing methods of 205 Chinese energy-saving and environmental protection industries from 2015 to 2020 from static and dynamic perspectives, respectively, as well as the Tobit model to estimate the impact of factors such as the digital transformation and green technological innovation of enterprises on financing efficiency. The study shows the following: (1) Static analysis shows that: the financing efficiency of the comprehensive technical efficiency of China’s energy conservation and environmental protection industry is less than one, 5.8% to 23.41% of enterprises have very effective comprehensive technical financing efficiency, and fewer than 9% enterprises have very effective scale efficiency levels. Enterprises may have more room for improving their financing efficiency in the future. The four types of financing are, namely, internal financing, equity financing, fiscal financing, and debt financing, in descending order of efficiency. (2) Dynamic analysis shows that the financing efficiencies of debt financing and fiscal financing are both on an upward trend, while internal and equity financing efficiencies are on a downward trend. Additionally, the technological progress change index and scale efficiency are two key factors affecting the financing efficiency of different financing methods. (3) In terms of financing methods, the comprehensive technical efficiency and scale efficiency of endogenous financing and equity financing are high, while the comprehensive technical efficiency and scale efficiency of debt financing and fiscal financing are low and flat. (4) Digital transformation, green technology innovation, the asset–liability ratio, profitability, and operational capability have a significant positive impact on the financing efficiency of energy-saving and environmental protection enterprises. This paper studies the financing efficiency of China’s energy conservation and environmental protection industry under different financing methods and the mechanism through which key factors affect the financing efficiency of enterprises. It aims to provide a theoretical basis for managing financing methods scientifically and rationally and improving the financing efficiency of the energy conservation and environmental protection industry, as well as to provide practical reference for the implementation of digital transformation, green technology innovation and diversified financing in China and other developing economies. Full article

(This article belongs to the Special Issue Sustainable Corporate Finance Research)

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23 pages, 1968 KiB

Open AccessArticle

Can Green Credit Contribute to Sustainable Economic Growth? An Empirical Study from China

by Yue Li, Ting Ding and Wenzhong Zhu

Sustainability 2022, 14(11), 6661; https://doi.org/10.3390/su14116661 - 29 May 2022

Cited by 11 | Viewed by 3591

Abstract

Green development is an inevitable trend of sustainable development: how does it affect green economic growth as the main channel of green project financing and the core force of building a green financial system? The present article measures the relationship between green credit and sustainable economic growth using a benchmark regression analysis model and explores the main influencing factors and regional characteristics that affect the coupling development of green credit and sustainable economic growth by combining mechanism and heterogeneity tests. The results of the study show that: (i) Green credit has a significant positive contribution to sustainable economic growth. (ii) In terms of the transmission mechanism, industrial upgrading and environmental regulation have a significant impact on sustainable economic growth. (iii) In terms of heterogeneity, the effect of green credit on sustainable economic growth is the most pronounced in the west, followed by the central and eastern regions of China. The policy implications of this study are that green credit in China is an inevitable trend, and that a sound policy supporting the legal system and information communication mechanisms should be promulgated to ensure the effective allocation of resources, thereby promoting the coordinated, sustainable and stable development of environmental protection and the economy. Full article

(This article belongs to the Special Issue Sustainable Corporate Finance Research)

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17 pages, 1966 KiB

Open AccessArticle

Heterogeneity Effect of Corporate Financialization on Total Factor Productivity

by Hui Wang and Shu Xu

Sustainability 2022, 14(11), 6577; https://doi.org/10.3390/su14116577 - 27 May 2022

Cited by 2 | Viewed by 2047

Abstract

As corporate financialization becomes an important stylized fact, policymakers and economists are concerned that corporate financialization may harm firms’ productivity by reducing operation investment. However, no previous literature has assessed the heterogeneous effect of corporate financialization on total factor productivity induced by self-selection. In this study, we do so by leveraging the framework of marginal treatment effects (MTE) using samples of Chinese listed non-financial companies during the period from 2007 to 2018. We find that firms with high resistance to financialization can result in gains in productivity by choosing financialization. In contrast, firms with low resistance to financialization have a significant reduction in total factor productivity (TFP) when choosing financialization. Meanwhile, based on our counterfactual analysis, a stable fluctuation of housing growth is shown to have a significant impact on total factor productivity improvement, and the evidence is supportive of the TFP loss being mitigated by a stable housing market. Moreover, the mechanism analysis confirms a strong negative impact of financialization on innovation, which is the potential channel to depress aggregate total factor productivity. The detected heterogeneity effect highlights the importance of housing price in the self-selection of financialization choices to affect the TFP. Policymakers may wish to focus on corporate financialization, which is accompanied by inhibition in TFP growth, keeping the housing market stable in order to minimize the side effects of financialization on productivity. Full article

(This article belongs to the Special Issue Sustainable Corporate Finance Research)

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15 pages, 541 KiB

Open AccessArticle

Extreme Spillover between Green Bonds and Clean Energy Markets

by Dongming Jiang and Fang Jia

Sustainability 2022, 14(10), 6338; https://doi.org/10.3390/su14106338 - 23 May 2022

Cited by 8 | Viewed by 2430

Abstract

This paper examines green bonds (GB), which have received much attention for providing funding for clean energy (CE) market reforms. We investigate the extreme spillover effects between GB and CE markets by using both MVMQ-CAViaR and Granger causality in risk methods over the period from 5 July 2011 to 24 February 2020. Since there are usually extreme asymmetric spillovers between financial markets, we examined whether this phenomenon exists between GB and CE markets. Our empirical analysis results find the significant extreme spillovers from GB to CE markets. In addition, we find that the upside and downside risk spillovers between GB and CE markets are asymmetric. The upside spillover is greater than downside spillover from GB to CE markets and the impact of GB on CE markets is greater. However, the extreme spillover from CE to GB markets is not significant by either the Granger causality in risk or the MVMQ-CAViaR model. Our findings have important implications for investors, policy makers and researchers. Full article

(This article belongs to the Special Issue Sustainable Corporate Finance Research)

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28 pages, 2066 KiB

Open AccessArticle

Impact of Epidemics on Enterprise Innovation: An Analysis of COVID-19 and SARS

by Xin Li, Xingyuan He, Lu Zhou and Shushu Xie

Sustainability 2022, 14(9), 5223; https://doi.org/10.3390/su14095223 - 26 Apr 2022

Cited by 3 | Viewed by 2441

Abstract

This study analyzes the impact of SARS and COVID-19, the two most severe epidemics to occur in China since the 21st century, on corporate innovation, in order to find a path for sustained innovation growth under the epidemic. For COVID-19, the analysis used data from China’s A-share-listed companies from 2019 to 2020; a longer period (1999–2006) and a wider sample of Chinese industrial enterprises were used for the SARS epidemic. The empirical model was constructed using the difference-in-differences method. Both COVID-19 and SARS were found to have significantly reduced enterprise innovation. However, the effect of SARS disappeared after two years. For COVID-19, information asymmetry, financing constraints, and economic policy uncertainty moderated the epidemic’s effect on innovation. The results show that financing constraints and economic policy uncertainty reduce the epidemic’s negative impact. However, while most previous studies have found that an epidemic reduces the information asymmetry between investors and enterprises in the short term, thus raising enterprise innovation, we found that information asymmetry aggravated the epidemic’s negative impact. These findings can be applied to alleviate the current epidemic’s negative impact as well as improve enterprise innovation thereafter. Full article

(This article belongs to the Special Issue Sustainable Corporate Finance Research)

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15 pages, 2145 KiB

Open AccessArticle

Relationship between the Cost of Capital and Environmental, Social, and Governance Scores: Evidence from Latin America

by Ana Gabriela Ramirez, Julián Monsalve, Juan David González-Ruiz, Paula Almonacid and Alejandro Peña

Sustainability 2022, 14(9), 5012; https://doi.org/10.3390/su14095012 - 21 Apr 2022

Cited by 31 | Viewed by 8120

Abstract

Environmental, social, and governance (ESG) scores play a pivotal role in the strategic design of firms. The literature has demonstrated the importance of sustainability issues in the financial performance of firms around the world. In particular, understanding the relationship between sustainability and the cost of capital is crucial for determining financial strategy and decision making. We identify an opportunity in the literature to analyze this relationship within Latin America (LatAm) firms. Thus, this study analyzes the relationship between ESG scores with the cost of capital of firms with headquarters in LatAm using a data set that includes 606 observations corresponding to information about 202 firms from 2017 to 2019. To conduct our analysis, two fixed effects panel data models were estimated. We model this relationship by taking ESG scores and each of its ESG Pillar scores—i.e., Environmental, Social, and Governance pillar scores—as independent variables and analyzing how they affect the cost of capital. According to the results, there is an inverse effect relationship between ESG scores and the cost of capital. Additionally, we did not find a relationship between the Social Pillar score and the Environmental Pillar score with the cost of capital. By contrast, the Governance Pillar score shows a negative relationship with the cost of capital. This indicates that the increase in transparency about internal processes and governance entities can be an essential driver of value creation for firms and higher financing confidence in LatAm firms. This study represents a breakthrough in explaining the impact of ESG scores on the cost of capital in LatAm. Ultimately, the current study presents the potential for further research in this field. Full article

(This article belongs to the Special Issue Sustainable Corporate Finance Research)

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18 pages, 319 KiB

Open AccessArticle

Chinese Merchant Group Culture, Corporate Social Responsibility, and Cost of Debt: Evidence from Private Listed Firms in China

by Haifei Wang, Hongjun Wu and Peter Humphreys

Sustainability 2022, 14(5), 2630; https://doi.org/10.3390/su14052630 - 24 Feb 2022

Cited by 6 | Viewed by 3318

Abstract

Chinese merchant groups are commercial organizations that have developed over thousands of years. Given the importance of private firms to China’s sustainable development, this study investigates the impact of the traditional Chinese concept of merchant groups on corporate social responsibility (CSR) performance and cost of debt, using Chinese private listed firms during 2008–2020. We measure merchant group culture based on the company’s geographic location. Ordinary least squares regression models are used to test the hypotheses. According to the results, the CSR performance of firms from five traditional Chinese merchant groups is better than non-members. A positive relationship exists between the strength of merchant group culture and CSR performance; this relationship is stronger among merchant group companies. The closer the culture to CSR values, the better the CSR performance, which is negatively related to the cost of debt. The findings are in line with the peer effect theory. Therefore, the study provides evidence that it is essential to consider the traditional Chinese merchant group culture for firms’ CSR strategies beyond formal financial and regulatory factors in China. This study is a first step in exploring the impact of merchant group culture in China on CSR performance and the economic application of this relationship. Full article

(This article belongs to the Special Issue Sustainable Corporate Finance Research)

19 pages, 604 KiB

Open AccessArticle

Top Management Team Stability and Corporate Social Responsibility: The Moderating Effects of Performance Aspiration Gap and Organisational Slack

by Qiang Zheng and Danming Lin

Sustainability 2021, 13(24), 13972; https://doi.org/10.3390/su132413972 - 17 Dec 2021

Cited by 5 | Viewed by 3716

Abstract

Although studies on the impact of senior executives on corporate social responsibility (CSR) are relatively sufficient, they take a static perspective when investigating the different attitudes of senior executives towards fulfilling social responsibility. Few studies consider the impact of the dynamic changes in a top management team (TMT) on sustainable corporate development, especially social responsibility. We perform regression analysis on 2010–2019 data from Chinese listed firms to examine the relationship between TMT stability and CSR performance and consider the moderating roles of the performance aspiration gap and slack resources. We find that TMT stability has a positive impact on CSR performance and that the performance aspiration gap and slack resources negatively moderate the relationship between TMT stability and CSR performance. This study expands the current literature on the relationship between TMT characteristics and social responsibility, sheds light on what situations can cause agency problems, and provides practical guidance for the sustainable development of a firm and adequate performance of CSR. Full article

(This article belongs to the Special Issue Sustainable Corporate Finance Research)

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17 pages, 305 KiB

Open AccessArticle

Does a Foreign Board Improve Corporate Social Responsibility?

by Doddy Setiawan, Rayenda Khresna Brahmana, Andi Asrihapsari and Siti Maisaroh

Sustainability 2021, 13(20), 11473; https://doi.org/10.3390/su132011473 - 17 Oct 2021

Cited by 24 | Viewed by 3221

Abstract

This study examines the effect of foreign boards on corporate social responsibility, exploring the issues of two-tier board systems (boards of directors and boards of commissioners). Using data for manufacturing firms listed on the Indonesia Stock Exchange over the sample period of 2017–2019, the results suggest that a foreign board engages more in corporate social responsibility activities. Our key finding remains robust with respect to all foreign board measures (foreign ownership, foreign board members, foreign directors, foreign commissioners, foreign CEO, and foreign chairperson) and to alternative estimation methods, and pass a series of endogeneity checks. We established the causal effect from foreign boards to CSR, supporting institutional theory and contesting agency theory. Full article

(This article belongs to the Special Issue Sustainable Corporate Finance Research)

16 pages, 425 KiB

Open AccessArticle

The Impact of Family Ownership on Quality and Disclosure of Internal Control in Pakistan

by Imran Abbas Jadoon, Umara Noreen, Usman Ayub, Muhammad Tahir and Naima Shahzadi

Sustainability 2021, 13(16), 8755; https://doi.org/10.3390/su13168755 - 5 Aug 2021

Cited by 9 | Viewed by 2437

Abstract

The role of family owners in the internal control environment is characterized by contradictory theoretical arguments i.e., entrenchment and alignment behavior. Therefore, the objective of this study is to investigate the behavior exhibited by family owners concerning the internal control environment in an underdeveloped regulatory setting. The study collected both primary and secondary data to use a multivariate regression research design to investigate the impact of family owners and CEOs on the internal control quality and disclosure of enterprises. The results of the current study demonstrated that family owners and family CEO have a negative impact on the internal control quality and disclosure, which validates the entrenchment behavior exhibited by family owners in the Pakistani setting. The results of the current study imply that policymakers should promote strict policy initiatives regarding the effectiveness of internal controls and their reporting so that companies are compelled to have better engagement in internal control practices for the protection of minority shareholders. Full article

(This article belongs to the Special Issue Sustainable Corporate Finance Research)

16 pages, 299 KiB

Open AccessArticle

Audit Quality under Influences of Audit Firm and Auditee Characteristics: Evidence from the Romanian Regulated Market

by Mihai Carp and Costel Istrate

Sustainability 2021, 13(12), 6924; https://doi.org/10.3390/su13126924 - 19 Jun 2021

Cited by 9 | Viewed by 5347

Abstract

We have estimated the impact of some characteristics of the auditors and of the audited companies on audit quality for the Romanian listed firms (943 observations for the 2007–2019 period), using as a proxy for the audit quality the level of discretionary accruals, measured following the Jones (1991) model, and the accruals quality, estimated through the Dechow and Dichey (2002) model. These dependent variables have been related to variables that reflect both the characteristics of the audit firm (for example, Big 4 membership) and the characteristics of the audited firms (dimension, financial leverage, accounting standards applied, growth and profitability). Our results show that the auditor’s Big 4 membership contributes to an increase in discretionary accruals, decreasing the quality of the audit. The transition to IFRS did not have a significant influence on the quality of the audit. The audit opinion may have an effect on the discretionary accruals and the accruals quality in the sense that a modified opinion leads to an increase in the quality of the audit in the following financial year(s). Full article

(This article belongs to the Special Issue Sustainable Corporate Finance Research)

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