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Business strategy, sustainability, and firm value: A test of financial slack and agency theories

Author

Listed:
  • Monowar Mahmood
  • Ali Uyar
  • Cemil Kuzey
  • Abdullah S. Karaman

Abstract

Do cost leaders engage with sustainability practices or avoid them to save costs, and do differentiators implement those practices to attract the sympathy of the customers or not? How do shareholders of each strategy follower consider those practices? Answering these questions is the main purpose of this study. We find that while cost leadership is significantly and positively associated with environmental, social, and governance sustainability, differentiation is significantly and negatively associated with social and environmental sustainability but not with governance sustainability. While cost leaders' shareholders approve of social and governance sustainability, differentiators' shareholders disapprove of environmental, social, and governance sustainability.

Suggested Citation

  • Monowar Mahmood & Ali Uyar & Cemil Kuzey & Abdullah S. Karaman, 2023. "Business strategy, sustainability, and firm value: A test of financial slack and agency theories," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(5), pages 2924-2947, July.
    • Handle: RePEc:wly:mgtdec:v:44:y:2023:i:5:p:2924-2947
    DOI: 10.1002/mde.3855

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    2. Daniel Etse & Adela McMurray & Nuttawuth Muenjohn, 2025. "Financial capacity and sustainable procurement: the mediating effects of sustainability leadership and socially responsible human resource capability," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 27(7), pages 15727-15754, July.

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