The Impact of Firm Sustainability on Firm Growth: Evidence from USA

Abstract

This study is to examine the impact of firm sustainability on firm growth as an effect of implementing an ecologically and socially responsible actions: Evidence from USA. This study investigates the relationship between firm sustainability and firm growth. This study examines how firm sustainability affects the firm growth and also explore the measures that can be adopted to examining the role of firm sustainability on firm growth to study this relationship between firm sustainability and firm growth, this study utilized panel data over the period from 2002 to 2018 taken from Thomson Reuters Assets-4 Database. Generalized Method of Moments (GMM) statistical method is employed to measure the relationship among variables. The study is based on Agency theory, Stakeholder theory, Value-Enhancing theory and institutional theory perspective because firm sustainability, its impacts on firm growth is so multidimensional that a single theory cannot justify the issue. The hypothesis is that high Return on Assets (ROA) will cause high firm sustainability is maintained by the empirical findings. Leverage has negative impact on ROA rating since if firm has high debt, it will focus more on financing this debt rather than investing in ROA. Market to book ratio also has a negative impact on ROA rating. Total Assets significantly and positively affects the ROA rating. Other Tangible assets significantly and positive affect the ROA rating. Salaries to assets ratio has a negative impact on ROA. Because, larger firms have more social responsibility, since their information is visible hence, they are more likely to be scrutinized by government, public and special interest groups. This find out some significant implication for the policy makers, ROA plays an important role to manage as well as ultimately provide safe environment to all the stakeholders as well as enhance the firm performance. Therefore, policy makers should follow those policies which enhance the ROA for the mutual benefits of all the stakeholder, firm, country and globe.