Does Corporate Sustainability Performance Increase Corporate Financial Performance? Focusing on the Information and Communication Technology Industry in Korea

Abstract

Abstract Corporate sustainability has increased in importance, because corporations must survive in a social and ecological network as an interdependent going concern. However, from a business perspective, it is an empirical issue whether the firm's corporate sustainability performance is associated with its financial performance. In this paper, based on Ohlson's residual income model, the effect of corporate sustainability performance on financial performance is examined by utilizing the newly developed Korea Sustainability Index as a proxy for corporate sustainability performance. It was found that a firm's corporate sustainability performance is positively associated with its financial performance, and this positive association is more sensitive in the information and communications technology (ICT) industry than in non‐ICT firms. Furthermore, this moderating effect is mainly attributable to the service sector in the ICT industry. These effects are prominent in smaller low‐leveraged firms. Copyright © 2017 John Wiley & Sons, Ltd and ERP Environment