Firm Performance Sustainability and Reputation

Abstract

The first essay investigates the impact of the COVID-19 pandemic on the performance of Sharia-compliant and non-compliant firms within the Organization of Islamic Cooperation (OIC) member countries. Employing panel data from 337 publicly listed non-financial firms between 2016 and 2022, the research compares profitability and growth metrics, specifically Return on Assets (ROA), Return on Equity (ROE), and firm growth rates. Using ordinary least squares (OLS) and random effects (RE) regression models, the analysis incorporates firm-specific variables. The findings indicate that both Shari'ah compliance and the COVID-19 pandemic negatively impacted firm performance. Sharia-compliant firms experienced significantly greater declines in ROA and ROE compared to non-compliant firms. Furthermore, compliant firms exhibited reduced growth rates, which highlights potential vulnerabilities stemming from ethical financing constraints and conservative investment practices. The interaction between Shari’ah compliance and the COVID-19 pandemic further worsened these adverse outcomes, indicating an increased vulnerability among compliant firms during times of economic disruption. A comprehensive regional analysis has identified that firms in Asia were particularly affected, thereby emphasizing the geographic variations in the impacts observed. The second essay is an empirical study of the relationship between Environmental, Social, and Governance (ESG) performance and corporate reputation. The goal is to address the existing gap in sustainability literature. This study employs a comprehensive panel dataset that includes 4,000 US firms from 2014 to 2023. The aim of this study is to investigate how ESG performance influences corporate reputation through annual and cumulative corporate responsibility awards. The study utilizes various econometric techniques to tackle issues concerning endogeneity and sample selection bias. The econometric techniques include logistic regression, Ordinary Least Squares (OLS), Two-Stage Least Squares (2SLS), Propensity Score Matching (PSM), Entropy Balancing, and Heckman selection models. The results consistently show that companies with better ESG performance are significantly more likely to be acknowledged with corporate responsibility awards. The strength of these findings is supported by various robustness analyses. The study examines how firm-specific characteristics, including company size, financial performance, and research and development, influence the relationship between ESG engagement and reputation outcomes. The evidence indicates that these factors enhance the positive impact of ESG performance on corporate reputation. The findings highlight the strategic value of ESG initiatives for corporate leaders and policymakers, which emphasizes their role in enhancing stakeholder trust and securing long-term competitive advantages.