Abstract
Socially responsible investment (SRI) indices provide an interesting opportunity to analyse the links between corporate financial performance (CFP) and corporate sustainability performance (CSP). However, few studies focus on the antecedents of inclusions in and exclusions from SRI indices. Specifically, the implications of corporate sustainability disclosure (CSD) have been largely ignored in this field. Furthermore, previous literature on the CSP-CSD-CFP links shows inconclusive results that have been attributed to both methodological and measurement problems, which suggest the existence of asymmetry, equifinality and complexity amongst these links. This study targets two under-researched areas regarding the determinants of changes in the composition of SRI indices, and the effects of CSD on CSP. This study also attempts to overcome the methodological and measurement limitations of previous studies on the CFP-CSD-CSP links. The study presents a fuzzy-set qualitative comparative analysis (fsQCA) to explore how different combinations of CFP and CSD indicators are related to inclusions in an SRI index (assumed as expressions of a good CSP), and exclusions from an SRI index (equivalent to a poor CSP). The empirical results reveal that a combination of different CSD indicators is necessary, but not sufficient, to lead to the inclusion in or exclusion from an SRI index, and that CFP measures have asymmetrical effects on CSP. CSD is a relevant antecedent or precondition of CSP that can motivate changes in corporate behaviours towards an improved CSP. Poor CSP, leading to an exclusion from the index, is associated with poor CSD and a deterioration of CFP. The implications for researchers, business managers, SRI rating agencies and policymakers are derived.
Highlights
The relationship between corporate financial performance (CFP) and corporate sustainability performance (CSP) is probably one of the most researched subjects in the field of corporate sustainability [1]
Sustainability, or socially responsible investment (SRI) indices have been mainly used under this CSP-CFP field of research in three ways: (1) As a proxy for CSP, taking into consideration that being listed into a sustainability index is synonymous of having a good CSP [3]; (2) to conduct event studies analysing whether the announcement of the inclusion and exclusion events has any significant impact on stock returns [4,5,6]; and (3) to analyse the financial performance of sustainability indices, funds or portfolios against the performance of conventional or non-sustainability-screened ones
This study approaches the analysis of the CSP-CFP link in a rather particular fashion, by combining the first two strands of this literature based on SRI indices: On one hand, being listed or delisted from an SRI index are considered proxies for a good and poor CSP, respectively; and on the other hand, we focus on inclusion and exclusion events, but instead of trying to explain their impact on CFP, we explore whether inclusions and exclusions, as expressions or result of a good or poor CSP, are related to, or explained by, corporate sustainability disclosure (CSD) and CFP
Summary
The relationship between corporate financial performance (CFP) and corporate sustainability performance (CSP) is probably one of the most researched subjects in the field of corporate sustainability [1]. Sustainability, or SRI indices have been mainly used under this CSP-CFP field of research in three ways: (1) As a proxy for CSP, taking into consideration that being listed into a sustainability index is synonymous of having a good CSP [3]; (2) to conduct event studies analysing whether the announcement of the inclusion and exclusion events has any significant impact on stock returns [4,5,6]; and (3) to analyse the financial performance of sustainability indices, funds or portfolios against the performance of conventional or non-sustainability-screened ones (see [7] for a meta-analysis of previous research on this topic) Their contributions are highly relevant, the implications of entering or dropping out of a sustainability index have been object of analysis in a small number of papers compared to other approaches to exploring the relationship between CFP and CSP [6].
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
