Review Of Literature Of Financial Performance

Review Of Literature Of Financial Performance-87
The model also incorporates other business variables that might affect the relationships between both types of performance, such as return on assets (ROA) ratio, company size, debt ratio, and industry.The results suggest that, for specific industries, return on assets is a necessary condition for companies with leverage to reduce the cost of debt due to their sustainability profile and consequently boost their ROE.The relationship between social and environmental performance and financial performance in companies has been a subject widely debated in the literature but the results obtained to date are not conclusive.

In order to promote this type of investments, sustainability agencies evaluate the social and environmental impacts of business actions and then, after applying their own methodologies, offer indicators of the social and environmental performance of companies.

Among these tools can be found the so called sustainability index.

The term ‘triple bottom line’, developed by [1], tries to emphasize three aspects, people (social), profits (economic) and planet (environmental), which must be present in the business management.

The implementation of social, environmental, and economic actions with sustainability criteria is a consequence of the deep globalization that the markets have experienced and the growing demand of stakeholders of social commitment and transparency, on the part of the companies.

These actions are conceived as a mechanism that improves reputation and corporate image [2,3].

They are considered to be a key consideration for companies in response to society’s demands [4].

Given the dynamism and complexity of today’s business environment, it is very likely that corporate sustainability derived from the practice of its social responsibility will influence FP.

According to [5], the incorporation of sustainability criteria in the main strategies of companies can generate strategic benefits that contribute to value creation.

In addition, the evidence shows that the financial performance of the companies listed in these indices has not been lower than those of the companies that are not managed following the liability criteria [9].

This research tries to contribute new empirical evidence to the open debate on the relations between CSP and FP in listed companies.


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