Journal of Cleaner Production 57 (2013) 134e141

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Journal of Cleaner Production

journal homepage: www.elsevier.com/locate/jclepro

Determinants of corporate sustainability performance in emerging

markets: the Brazilian case
Isabel C. Loureno a, b, Manuel Castelo Branco c, *
a

Lisbon University Institute ISCTE-IUL, Portugal

FEA/USP, Brazil
c
Faculty of Economics, University of Porto, and OBEGEF (Observatory in Economics and Management of Fraud), Rua Dr. Roberto Frias, 4200-464 Porto,
Portugal
b

a r t i c l e i n f o

a b s t r a c t

Article history:
Received 5 November 2012
Received in revised form
7 June 2013
Accepted 10 June 2013
Available online 20 June 2013

This study investigates the factors that drive high levels of corporate sustainability performance in an
emerging country, Brazil. The level of said performance is proxied by membership of the Bovespa
Corporate Sustainability Index. Using a framework combining stakeholder theory and a resource-based
perspective, we examine the incentives for Brazilian listed rms to invest in corporate sustainability and
develop a number of hypotheses that relate corporate sustainability performance both with operating
and with nancing characteristics. Our results indicate that Brazilian leading corporate sustainability
performance rms are signicantly larger and have a larger return on equity than their counterparts,
which is consistent with previous ndings for US rms. Additionally, Brazilian leading corporate sustainability performance rms also have signicantly lower ownership concentration and they are more
likely to have international listing status than their counterparts. Thus, our ndings suggest that
nancing characteristics are likely to have higher signicance in determining corporate sustainability
performance in emerging markets, such as Brazil, than in developed countries.
2013 Elsevier Ltd. All rights reserved.

Keywords:
Brazil
Corporate sustainability
Emerging markets
Sustainability index

1. Introduction
Sustainable development represents an ethical concept related
to ght against poverty and protect the environment simultaneously and on a macro-level (Baumgartner and Ebner, 2010).
When incorporated by the rm, it is called corporate sustainability
and it contains, like the former concept, three aspects: economic,
environmental and social (Baumgartner and Ebner, 2010).
Engagement in activities leading to sustainable development has
emerged as an important dimension of corporate voluntary practice worldwide (Lacy et al., 2010).
There is a paucity of research on the organizational determinants of corporate sustainability (Chih et al., 2010). What is
more, most of the extant literature on these determinants is based
on companies operating in developed countries (Bansal, 2005;
Artiach et al., 2010; Ziegler and Schrder, 2010) with little known
on the determinants of corporate sustainability performance in
emerging countries. Our study contributes to this literature on
determinants of corporate sustainability by examining empirical
evidence from Brazil.

* Corresponding author.
E-mail address: mcbranco@fep.up.pt (M.C. Branco).
0959-6526/$ e see front matter 2013 Elsevier Ltd. All rights reserved.
http://dx.doi.org/10.1016/j.jclepro.2013.06.013

The aim of the paper is to examine the determinants of

corporate sustainability performance in Brazil, as proxied by
membership of the So Paulo Stock Market (Bovespa) Corporate
Sustainability Index, launched in 2005. In particular, we analyze the
hitherto almost unexplored effect of cross-listing on corporate
sustainability. Given the focus of extant studies on companies listed
in capital markets of developed countries, this issue has not been
given much thought. As far as we are aware, this effect has been
explored only in the case of corporate reporting of sustainability
issues (Hackston and Milne, 1996; Haniffa and Cooke, 2005; Chu
et al., 2013). The main purpose of this paper is to discover
whether multiple listing is a factor signicant in inuencing
corporate sustainability performance of companies listed on the
Bovespa. We want to discover whether rms listed on Bovespa
which are also listed in foreign capital markets are more likely to
have superior sustainability performance.
We also aim at understanding whether the determinants of
corporate sustainability in Brazil are different from the determinants of corporate sustainability performance in developed
countries, by comparing, as far as possible, the results of this study
with the results of studies undertaken in a developed country
setting, such as Artiach et al. (2010). The set of explanatory factors
of corporate sustainability performance related to rm operating
characteristics proposed in this study is fairly similar to the one

I.C. Loureno, M.C. Branco / Journal of Cleaner Production 57 (2013) 134e141

proposed in Artiach et al.s (2010) study. This will allow us to

establish a comparison between the operating determinants of
corporate sustainability performance in a developing country,
Brazil, and a developed country, USA.
We add a set of corporate characteristics related to nancing
activities besides those considered by Artiach et al. (2010): listing in
foreign capital markets and ownership concentration. Brazil is a
code law country with weak investor protection and law enforcement and with high ownership concentration, and extant research
suggests that ownership concentration is a natural response to
these types of environments (Lopes and de Alencar, 2010). Hence,
we add this latter variable because it amounts to one of the most
distinguishing aspects of the Brazilian environment when
compared to the United States (Lopes and de Alencar, 2010).
This paper is organized as follows. Section 2 analyses the
concept of corporate sustainability and reviews the literature on
the determinants of corporate sustainability performance. Section
3 develops the theoretical framework of this study. Section 4 describes the research design and Section 5 analyzes the empirical
results. Finally, Section 6 presents the summary and concluding
remarks.

2. Background
Corporate sustainability has become the concept used most
widely to address issues pertaining to companies impacts on, relationships with, and responsibilities to, society. According to
Labuschagne et al. (2005, p. 373) it entails the incorporation of the
objectives of sustainable development, namely social equity, economic efciency and environmental performance, into a companys
operational practices.
A wide variety of instruments through which a company can
contribute to sustainable development by incorporating the social,
economic and environmental dimensions of corporate sustainability in its practices have been developed (Lozano, 2012). Evidence of a growth in the importance attributed by companies to
corporate sustainability and the reporting thereof is, for example,
their increasingly larger interest of companies in instruments such
as sustainability reporting (Lozano and Huisingh, 2011). Several
initiatives have been launched by international organizations to
promote corporate sustainability, such as the United Nations Global
Compact (UNGC) (Perez-Batres et al., 2011), the Global Reporting
Initiatives (GRI) Sustainability Reporting Guidelines (Brown et al.,
2009; Marimon et al., 2012) or the International Organization for
Standardizations (ISO) standard ISO 14001 giving guidance on
environmental management (Marimon et al., 2011).
Searcy and Elkhawas (2012) emphasize that for the engagement
with corporate sustainability to be a source of value creation rms
have to dene and measure their sustainability performance. They
note that the development of sustainability indicators to meet said
needs has been an endeavor of the academic literature, both at the
rm corporation level (see, for example, Palme and Tillman, 2008)
and at the industry level (see for example, Azapagic, 2004;
Nordheim and Barrasso, 2007), as well as of individual rms and
industry associations.
The sustainability indices linked to nancial markets that have
been developed around the world aim at providing investors with
further insight into corporate sustainability performance (Searcy
and Elkhawas, 2012). Examples of said indices are the Dow Jones
Sustainability Index, the FTSE4Good, and the Bovespa Corporate
Sustainability Index. They help to highlight corporations with
exemplary sustainability performance (Searcy and Elkhawas, 2012).
These indices may be thought of as serving as information brokers (Brown et al., 2009, p. 575).

135

An increasing number of studies on sustainability issues use

sustainability indices as proxies for corporate sustainability performance (Artiach et al., 2010; Cheung, 2011; Chih et al., 2008,
2010; Collison et al., 2008; Consolandi et al., 2009; Curran and
Moran, 2007; Loureno et al., 2012; Ziegler and Schrder, 2010).
Of these studies, only Artiach et al. (2010), Ziegler and Schrder
(2010) and Chih et al. (2010) analyze the determinants of corporate sustainability performance.
Artiach et al. (2010) examined the incentives for US rms to
invest in sustainability principles. They examined rm-specic
factors associated with high corporate sustainability performance,
as proxied by membership of the Dow Jones Sustainability World
Index. They found that leading corporate sustainability performance rms are signicantly larger, have higher levels of growth
options and a higher return on equity when compared with conventional rms. However, contrary to their predictions, neither the
level of cash resources available to the rm nor its leverage is
an important factor in determining corporate sustainability
performance.
Ziegler and Schrder (2010) examine the determinants of the
inclusion of European rms in the Dow Jones Sustainability World
Index and the Dow Jones Stoxx Sustainability Index. They conclude
that while a restricted econometric analysis implies a positive effect
of corporate nancial performance, this impact becomes ambiguous in more exible panel probit models. In addition, their analysis shows a positive effect of rm size, a negative impact of
nancial health and no signicant inuence of the risk tolerance of
the management.
Chih et al. (2010) empirically investigated whether corporate
sustainability is affected by nancial and institutional variables,
using a sample of 520 nancial rms in 34 countries. They classied rms appearing in the DJSI World index as corporate sustainability rms, while those appearing in the Dow Jones World
but not in the DJSI World index are classied as non-corporate
sustainability rms. They concluded that: (1) larger rms will be
more corporate sustainability-minded, and the link between the
corporate nancial performance and corporate sustainability is
insignicant; (2) rms would act in more sustainable ways to
enhance their competitive advantages when the market competitiveness is more intense; (3) rms in countries with stronger legal
enforcement measures engage in more corporate sustainability
activities, but rms in countries with stronger investor rights
engage in less corporate sustainability activities; and (4) selfregulation in the nancial industry has a signicantly positive
effect on corporate sustainability.
Although not using a sustainability index as proxy for corporate
sustainability performance, one of the rst studies operationalizing
corporate sustainability and examining its organizational determinants, Bansal (2005) is also noteworthy. Bansal used a sample
of Canadian rms in the oil and gas, mining, and forestry industries
from 1986 to 1995. Interviews of industry members involved with
sustainable development were conducted and company annual
reports were reviewed to assess corporate sustainability. The study
showed that corporate sustainability increased from 1986 to 1995.
Findings suggested that international experience, media pressure,
mimicry, and organizational size were positively related to corporate sustainability.
Similar studies for emerging markets are very scarce, whether
focusing on individual countries or on making comparisons between countries. The purpose of this paper is to help to ll this gap
by exploring the determinants of corporate sustainability performance in Brazil. Muller and Kolk (2010), Zu and Song (2009) and Li
and Zhang (2010) are among the few studies on corporate sustainability conducted in the setting of emerging markets. However,
their purposes and methodology are very different from ours.

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I.C. Loureno, M.C. Branco / Journal of Cleaner Production 57 (2013) 134e141

Muller and Kolk (2010) found that among auto parts suppliers in
Mexico trade intensity and managements commitment to ethics
are signicantly related to higher corporate sustainability performance levels and that there is a virtuous relationship between the
two. Zu and Song (2009) and Li and Zhang (2010) analyzed the case
of Chinese rms. Both studies show that it is important to consider
ownership type in assessing corporate social responsibility in
emerging markets, in particular in China, where state ownership is
still prevalent. Especially relevant for our study are the ndings of Li
and Zhang, who found that rm size, protability, employee power,
leverage, and growth opportunity affect corporate social responsibility in China. Li and Zhang also found that for non-stateowned rms, corporate ownership dispersion is negatively
related to the level of corporate social responsibility, whereas for
state-owned rms this relation is reversed.
None of the studies referred above analyzed the effect of
cross-listing on corporate sustainability. Few studies on topics
related to corporate sustainability have analyzed the issue of
cross-listing. Hackston and Milne (1996) produced one of the
earlier studies analyzing the inuence of multiple listing on
corporate social reporting, and found evidence suggesting that
dual and multiple overseas listings may be associated with
greater social reporting by companies from New Zealand. Haniffa
and Cooke (2005) study corporate social reporting in a developing country setting, by analyzing annual reports of 139 nonnancial companies listed on the Kuala Lumpur Stock Exchange, and found that multiple listing was statistically related to
such reporting. More recently, Chu et al. (2013) analyzed the
factors driving greenhouse gas reporting by Chinese companies
and found that, contrary to their expectations, overseas listing
was not signicantly related to reporting. Chu et al. contend
that China being in the early stages of trying to balance economic
and sustainability interests may partly explain this nonsignicant relationship.
3. Theory and hypotheses development
The theoretical framework adopted in this study combines
stakeholder theory and a resource-based perspective. Stakeholder
theory provides a theoretical basis for analyzing the determinants
of corporate sustainability. In its instrumental stream, it points out
that a rm stands to gain by practicing stakeholder management
(Marom, 2006), that is by investing in the creation and maintenance of good relations with stakeholders. Stakeholder theory can
be complemented by the resource-based perspective since rms
may view meeting stakeholder demands as a strategic investment,
requiring commitments beyond the minimum necessary to satisfy
stakeholders (Ruf et al., 2001).
According to the resource-based perspective, differences in a
rms endowment of resources, especially intangibles, lead to differences in rm performance, given that such resources are difcult
to acquire or develop, to replicate and accumulate, and to be
imitated by competitors (Surroca et al., 2010). Human capital and
reputation are considered to be among the resources of greatest
strategic importance (Surroca et al., 2010). Engaging in corporate
sustainability is seen as providing internal or external benets, or
both (Branco and Rodrigues, 2006; Orlitzky et al., 2003). Investments in corporate sustainability activities have internal benets by helping a company in developing new resources and
capabilities which are related to know-how and corporate culture,
and would lead to more efcient use of resources. The external
benets of corporate sustainability are related to its effect on
corporate reputation. Companies with favorable reputation may
improve relations with stakeholders such as governments, suppliers and community representatives, resulting in reduction in the

cost of the contracts (implicit and explicit) they establish with them
(Liston-Heyes and Ceton, 2009).
In this study, we propose that companies engage in corporate
sustainability activities to conform to how their stakeholders
expect their operations should be conducted, because they expect
that having good relations with their stakeholders is susceptible of
leading to increased nancial returns by assisting in developing and
maintaining valuable intangible assets.
3.1. Operating characteristics
3.1.1. Size
Larger companies, probably because of visibility issues, are
subject to greater public scrutiny than smaller companies, thus
being under greater pressure to behave in more sustainable
manner (Chih et al., 2010). Large companies, on average, are more
diversied across geographical and product markets which means
that they have larger and more diverse stakeholder groups
(Brammer and Pavelin, 2004). A larger market presence translates
into more transactions, which lead to a higher probability of
negative events (Artiach et al., 2010; Godfrey et al., 2009). The
consequence is that larger rms should be more willing to engage
in socially and environmentally responsible activities to cover this
increased risk than smaller rms. In addition, size may be considered as an indicator for the capacity of a rm to engage in environmental and social activities, which lead to xed costs that are
less important for larger companies (Ziegler and Schrder, 2010).
It follows that rms size and corporate sustainability performance are positively related.
3.1.2. Protability
From a stakeholder perspective (Artiach et al., 2010; Roberts,
1992; Ullman, 1985), economic performance is expected to be
positively associated with corporate sustainability performance.
Not only economic performance is considered to be inuenced by
the nancial capability to undertake sustainability activities, but
also economic demands are deemed to have priority in periods of
economic difculty. In periods of low economic performance, the
companies economic objectives will be given more attention
than social concerns (Ullman, 1985). The managers of nonprotable rms are asked to reduce costs and maximize economic returns to nancial stakeholders, instead of meet social
stakeholders demands through expenditure on sustainable activities (Artiach et al., 2010). High levels of protability allow the
rm to meet analyst and shareholder expectations and still retain
the ability to meet social stakeholder demands through expenditure on corporate sustainability performance (Artiach et al.,
2010). In addition, rms with better economic performance can
invest in new capital, which leads to a better sustainability performance (even when this is not the main goal) (Ziegler and
Schrder, 2010).
It follows that rms protability and corporate sustainability
performance are positively related.
3.1.3. Growth options
Padgett and Galan (2010) contend that the product and process
innovation resulting from R&D can lead to corporate sustainabilityrelated processes and products, giving as example the improvement of processes making them more effective. This is likely to
reduce the amount of energy consumed by the rm, which leads to
cost reductions and less pollution (Padgett and Galan, 2010). They
show that R&D intensity positively affects CSR. Artiach et al. (2010)
argue that it is more likely that a rm with a higher level of growth
options in its asset mix to be able to incorporate sustainability
principles into its competitive strategy. A measure of growth

I.C. Loureno, M.C. Branco / Journal of Cleaner Production 57 (2013) 134e141

options will capture also the extent of a rms investment in R&D

(Artiach et al., 2010).
It follows that rms growth options and corporate sustainability performance are positively related.

137

It follows that international listing status and corporate sustainability performance are positively related.

4. Research design
3.2. Funding characteristics
4.1. Sample and data
3.2.1. Leverage
The power of creditors as a stakeholder depends upon the degree
to which the company relies on debt nancing (Roberts, 1992). The
more the company relies on debt nancing, the more likely it is to
address the concerns of debtholders than those of less powerful
stakeholders (Artiach et al., 2010). The emphasis placed on the claims
of a company debtholders over those of less powerful stakeholders
will increase as its leverage increases (Artiach et al., 2010). In addition, rms with low debt can have more exibility to nance environmental and social activities (Ziegler and Schrder, 2010).
It follows that rms leverage and corporate sustainability performance are negatively related.
3.2.2. Ownership concentration
Given their greater embeddedness in powerful social relations, public companies have their autonomy reduced and are
more vulnerable to external pressure (Lee, 2009, p. 440). They are
constrained to become more accountable for their actions (Lee,
2009). As the distribution of ownership of a company becomes
less concentrated, the demands placed on it by shareholders
become broader (Li and Zhang, 2010). When a companys shares
are widely held the issue of public accountability may become
more important because it is more likely that these companies are
being held by the public at large (Ghazali, 2007). A higher level of
public accountability may necessitate additional involvement in
socially or environmentally responsible activities (Ghazali, 2007).
Snchez et al. (2011) suggest that the management of a company is
more sensitive to social problems when the ownership of the
company is more dispersed, given that ethical investors or social
funds are more likely to intervene in their decision-making
processes.
It follows that rms level of ownership concentration and
corporate sustainability performance are negatively related.
3.2.3. International listing
Literature on cross-listing suggests that rms cross-listed on a
major stock exchange have better corporate governance than their
counterparts from the same country, since cross-listed rms are
subject to strong investor protections (Lel and Miller, 2009). The
most important benet of good governance is perhaps access to
capital markets on better terms (Doidge et al., 2007). This benet is
worth less to a rm in a country with low nancial and economic
development because it will obtain less funding from the capital
markets, and consequently rms in these countries will invest less
in governance (Doidge et al., 2007). Black et al. (2010) suggest that
cross-listing provides a way for Brazilian rms to signal their intent
to maintain a higher level of disclosure and other corporate
governance practices.
In this paper, we extend these arguments to the case of corporate sustainability by suggesting that rms with an international
listing status have better corporate sustainability performance than
their counterparts from the same country. Jamali et al. (2008)
suggest that there is a salient two-way relationship and
increasing overlap between corporate governance and corporate
sustainability. Corporate sustainability may be seen as an extension
of rms efforts to foster effective corporate governance, ensuring
rms sustainability via sound business practices that promote
accountability and transparency (Jo and Harjoto, 2011).

The empirical analysis relies on the Brazilian listed rms with

information available at the Worldscope database at the end of
2010. These rms are classied into two groups, depending on
whether they belong or not to the Bovespa Corporate Sustainability
Index. This classication gives rise to our dependent variable, a
proxy for the level of corporate sustainability performance.
The Bovespa Corporate Sustainability Index is an index tracking
the economic, nancial, corporate governance, environmental and
social performance of leading companies listed in the So Paulo
Stock Exchange. It was launched in December 2005 to provide asset
managers and investors with a reliable and objective benchmark of
the best corporate sustainability practices in the country. The Index
is developed by the Sustainability Study Center at Fundao Getulio
Vargass Business School, a leading business school in Brazil. It includes up to 40 companies that seek excellence in managing sustainability. Data on sustainability performance is collected by
means of a detailed questionnaire sent by the Sustainability Study
Center of Fundao Getulio Vargas each year to up to 200 of Brazils
largest and most traded publicly quoted companies. Completion of
the questionnaire is voluntary and demonstrates the companys
commitment to sustainability issues. Cluster analysis is used to
analyze responses, allowing the identication of groups of companies with similar performances and the group with top performance. Companies in this group make up the nal portfolio.
An increasing number of studies on corporate sustainability
performance are using Sustainability Indexes as a proxy for
corporate sustainability performance, namely the Dow Jones Sustainability Index (e.g. Artiach et al., 2010; Chih et al., 2010;
Consolandi et al., 2009; Cheung, 2011) and the FTSE4Good (e.g.
Chih et al., 2008; Collison et al., 2008; Curran and Moran, 2007).
The accounting data used in the empirical analysis is that reported in the 2009 consolidated nancial statements. These data
were collected from the Thomson Worldscope Database. After
excluding rms that lacked sufcient accounting or market value
data, 235 valid rm observations remained. To ensure that the
regression results are not unduly sensitive to outliers, we exclude
observations with studentized residuals absolute value greater
than 3. However, the main results are not sensitive to the exclusion
of outliers. The nal sample is composed of 30 rms that belong to
Bovespa Corporate Sustainability Index (leading corporate sustainability performance rms) and 203 rms that make no part of
this index (non-leading CSP rms).
Table 1 presents the sample distribution across industries.
When all the rms are considered together, the industrial sector is
the most dominant with 44%, followed by utilities and nancial
industries which represent 50% of the sample (25% each). The
Table 1
Sample composition by industry.
All rms

Industry

SIC code

Leading
CSP rms

Non_leading
CSP rms

Industrial
Utilities
Financial
Services

SIC
SIC
SIC
SIC

10
14
6
0
30

33%
47%
20%
0%
100%

93
44
52
14
203

46%
22%
27%
7%
100%

103
58
58
14
233

44%
25%
25%
6%
100%

1, 2, 3 and 5
4
6
7 and 8

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I.C. Loureno, M.C. Branco / Journal of Cleaner Production 57 (2013) 134e141

Table 2
Variables denition and measurement.
Variable type

Variable
name

Variable label

Variable measurement

Dependent variable

CPS
SIZE
ROE
PB
LEV
OWN

Corporate sustainability
performance status
Size
Return on equity
Price-to-book
Leverage
Ownership concentration

LIST

International listing status

1 if the rm belongs to the Bovespa Corporate Sustainability Index

0 if the rm does not belong to the Bovespa Corporate Sustainability Index
Firms total assets (natural logarithm)
Firms return on equity
Firms market capitalization divided by common-equity
Firms debt divided by market capitalization
Percentage of equity ownership by substantial shareholders (with equity
of more than 5%)
1 if the rm is listed in a foreign stock exchange
0 if the rm is not listed in a foreign stock exchange

Independent
Independent
Independent
Independent
Independent

variable
variable
variable
variable
variable

(operating)
(operating)
(operating)
(nancing)
(nancing)

Independent variable (nancing)

smallest representation is for the services group. Both leading and

non-leading corporate sustainability performance rms are found
in each industry and the later predominates in all cases, with the
exception of services group. The percentage of leading corporate
sustainability performance rms in the industrial and nancial
industries is around 10%, contrary to the utilities industries where
the percentage is somewhat higher.
4.2. Measurement of variables
In order to test the hypotheses described in Section 3, some
variables are identied and computed. Table 2 provides details of
these variables. The dependent variable is a binary variable which
assumes 1 if the rm belong to the Bovespa Corporate Sustainability Index and 0 otherwise. In order to investigate the role of
operating and nancing characteristics on corporate sustainability
performance, two sets of independent variables are used: total
assets (SIZE), return on equity (ROE) and price-to-book ratio (PB),
on the one hand, and leverage (LEV), ownership concentration
(OWN) and international listing (LIST), on the other hand. We also
considered independent dummy variables in order to control for
the effect of the rms industry.
4.3. Research method
To test the hypotheses formulated in Section 3, rstly we
perform univariate comparisons based on descriptive statistics and
tests of equality for the central tendency measures in the case of
continuous variables, and tests of equality of proportions in case of
binary variables. Secondly, we estimated several logistic regression
models.
As rms are divided into two groups according to the level of
corporate sustainability performance e leading corporate sustainability performance rms and non-leading corporate sustainability
performance rms e we rst computed for each of these two
groups the descriptive statistics for each variable that represent the
most relevant subjects in our empirical analysis. Secondly, we
applied the equality of means parametric t-test, and the nonparametric ManneWhitney test when the normality or the variance equality assumptions underlying the t-test are not met, to
compare the resulting groups in terms of the continuous variables
of our study. For the binary variables, the test for the difference of
proportions is computed.
The univariate comparisons are complemented by the estimation of several logistic regressions. With this econometric model,
conclusions can be drawn about the interrelations between the
independent variables and their impact on the probability of being
a leading corporate sustainability performance rm. The equation
of the main logistic regression is:

PYi 1 EYi 1jX1i ; X2i ; .; X7i

1
1 eab1 X1i :::b11 X7i
(1)

where e represents the exponential and

Y CSP;
X1 SIZE;
X2 ROE;
X3 PB;
X4 LEV;
X5 OWN;
X6 LIST;
Table 3
Descriptive statistics and comparisons tests.
Panel A: Descriptive statistics
Mean

Median

Leading CPS rms (n 30)

SIZE
16.624
16.557
ROE
0.266
0.158
PB
3.586
1.793
LEV
0.725
0.443
OWN
0.559
0.552
0.170
0.000
LISTa
Non-leading CPS rms (n 203)
SIZE
14.667
14.544
ROE
0.141
0.127
PB
2.978
1.775
LEV
0.733
0.330
OWN
0.676
0.690
0.090
0.000
LISTa

SD

Min

Max

1.276
0.425
5.524
0.865
0.197
0.379

14.618
0.063
0.744
0.010
0.218
0

20.239
1.939
27.135
4.025
0.999
1

1.490
0.428
6.653
1.398
0.205
0.285

10.667
1.960
0.353
0.000
0.064
0

20.354
3.536
85.340
13.120
1.000
1

Panel B: Comparison testsb

Tests
SIZEb
ROEc
PBb
LEV
OWN
LIST

6.831***
1.680*
0.477
1.326
2.816***
1.083

SIZE is the natural logarithm of the rms total assets as of the end of the year; ROE is
the rms return on equity; PB is the rms price-to-book ratio as of the end of the
year; LEV is the rms end of the year total debt divided by end-of-year market
capitalization; OWN is the percentage of equity ownership by substantial shareholders (with equity of more than 5%); LIST is an indicator that equals 1 if the rm is
listed in a foreign stock exchange and 0 otherwise.
***, ** and * indicate signicant at the 0.01, 0.05 and 0.10 levels respectively.
a
The mean values for the variable LIST represent the percentage of rms listed in
a foreign stock exchange.
b
t-test in the cases of SIZE and PB; ManneWhitney test in the cases of ROE, LEV
and OWN, once normality assumption is rejected. Test of difference between proportions in the case of LIST.

I.C. Loureno, M.C. Branco / Journal of Cleaner Production 57 (2013) 134e141

X7j Industry dummy variables, with j 1, 2, 3,4.

Table 5
Logistic regression results.

5. Results

Exp. sign

Tables 3e5 report the statistical results. Tables 3 and 4 summarize the empirical results from the univariate analysis, while
Table 5 report ndings from binary logistic regressions.
Table 3, Panel A, presents the descriptive statistics for the subsamples of the 30 leading corporate sustainability performance
rms and 203 non-leading rms. Table 3, Panel B, provides the
central tendency equality tests (difference of proportions tests)
results for each of the continuous (binary) variables.
When comparing the groups of leading CPS rms and nonleading CPS rms, we nd that for all the variables, except LEV
and OWN, the mean and the median values are higher for the
leading corporate sustainability performance rms. However,
central tendency equality tests results for continuous variables and
the difference of proportions tests for binary variables show that
the mean (or median) values are signicantly different only for the
variables SIZE and OWN, at a 1% level, and ROE, at a 10% level.
Table 4 presents correlations between continuous variables.
These variables, which are included as independent variables in the
logistic regressions are not highly correlated. The LEV is positively
correlated with SIZE and negatively correlated with ROE, but the
coefcients are not too much high (LEV/SIZE: 0.242; LEV/ROE:
0.152). Additionally, ROE is positively correlated with PB with a
coefcient of 0.630 which is similar to the highest coefcient in
Artiach et al. (2010), between ROE and PB.
The univariate analysis is complemented by the estimation of
several logistic models based on Equation (1) on the entire sample
of leading and non-leading corporate sustainability performance
rms. With this econometric model, conclusions can be drawn
about the interrelations between the independent variables and
their impact on the probability of a rm to be a leading corporate
sustainability performance rm.
Table 5 reports the parameter estimates from the logistic regressions where the dependent variable (CSP) assumes the value 1
if the rms belongs to the Bovespa Corporate Sustainability Index
and 0 otherwise. We use different specications of Equation (1) to
test the role of operating and nancing characteristics in explaining
the probability of a rm to belong to the Bovespa Corporate Sustainability Index. Thus, Column (1) includes only the operating
characteristics. Two operating variables coefcients are statistically
signicant. As expected, SIZE and ROE are positively related to CSP.
In Column (2) we regress CSP on nancing characteristics. As expected, OWN is negatively related and LIST is positively related to
CSP. In Column (3) we combine operating and nancing determinants of corporate sustainability performance in order to access whether operating characteristics and nancing characteristics
both develop a signicant role in explaining the development of a
strategy of sustainable development. Our ndings show that both
Table 4
Correlation matrix.

SIZE
ROE
PB
LEV
OWN

139

SIZE

ROE

PB

LEV

OWN

1
0.017
0.060
0.242***
0.074

e
1
0.630***
0.152**
0.068

e
e
1
0.093
0.068

e
e
e
1
0.075

e
e
e
e
1

SIZE is the natural logarithm of the rms total assets as of the end of the year; ROE is
the rms return on equity; PB is the rms price-to-book ratio as of the end of the
year; LEV is the rms end of the year total debt divided by end-of-year market
capitalization; OWN is the percentage of equity ownership by substantial shareholders (with equity of more than 5%).
***, ** and * indicate signicant at the 0.01, 0.05 and 0.10 levels respectively.

Intercept
Operating
SIZE
ROE
PB
Financing
LEV
OWN
LIST
Industry
Utilities
Financial
Services
LR statistic
McFadden R2

C1

C2

C3

15.458***

0.081***

15.349***

0.852***
1.381**
0.013

e
e

0.946***
1.561**
0.030
0.006
3.957***
1.145*

0.299
3.108***
1.832***

0.606
0.855
17.677

1.574***
0.017
19.262

1.204**
0.670
17.946

48.804***
0.268

27.467***
0.134

63.749***
0.350

SIZE is the natural logarithm of the rms total assets as of the end of the year; ROE is
the rms return on equity; PB is the rms price-to-book ratio as of the end of the
year; LEV is the rms end of the year total debt divided by end-of-year market
capitalization; OWN is the percentage of equity ownership by substantial shareholders (with equity of more than 5%); LIST is an indicator that equals 1 if the rm is
listed in a foreign stock exchange and 0 otherwise.
***, ** and * indicate signicant at the 0.01, 0.05 and 0.10 levels respectively.

operating and nancing variables are playing an important role in

corporate sustainability performance.
To summarize, compared to their counterparts, Brazilian leading
corporate sustainability performance rms are signicantly larger,
have higher return on equity, have lower ownership concentration
and are more likely to have an international listing status. The
empirical evidence on a positive relationship between rms size
and corporate sustainability performance is consistent with previous literature on this issue related either with developed or with
developing countries (e.g. Artiach et al., 2010; Ziegler and Schrder,
2010; Chih et al., 2010; Li and Zhang, 2010). One exception is Zu and
Song (2009), who found that rms smaller in size are more likely to
have managers who opt for a higher CSR rating. However, differently from the other studies and from our own study, which are
based on CS indexes, Zu and Song (2009) ndings are based on
managers attitudes toward CS.
Consistent with Artiach et al. (2010) but in contrast with other
studies (e.g. Ziegler and Schrder, 2010; Chih et al., 2010), our results also provide evidence on a positive relationship between
rms protability and corporate sustainability performance. This
may result from the fact that both Artiach et al. (2010) and our
study use ROE as measure for protability, whereas Ziegler and
Schrder (2010) and Chih et al. (2010) use Return on Assets
(ROA). Artiach et al. (2010, p. 49) report that their nding is sensitive to the measurement of protability as ROE, rather than as
ROA, and suggest that such result is consistent with stakeholder
theory as it suggests that it is the level of prot available to
shareholders after considering higher ranking nancial claimants
rather than the level of protability per se that drives CSP. Another
difference that may be of consequence is that whereas Artiach
et al.s (2010) study and our own analyze rms from one country,
the other two studies analyze companies from several countries. On
the other hand, Chih et al. (2010) analyzed only nancial rms.
Findings suggesting that leading corporate sustainability performance rms have lower ownership concentration and are more
likely to have an international listing status than non-leading
corporate sustainability performance rms offer new insights to
the literature on the determinants of corporate sustainability performance. Considering the higher difculty in raising funds by
companies which operate in developing countries, in particular in
Brazil, where access to nance is one of the most severe rm-level

140

I.C. Loureno, M.C. Branco / Journal of Cleaner Production 57 (2013) 134e141

constraints on economic growth (Kenyon, 2008), this association

between nancing characteristics and corporate sustainability
performance is not unexpected.
The ndings on the relationship between ownership concentration and corporate sustainability performance are congruous
with our expectations and with results of previous literature,
namely those of Li and Zhang (2010), who found that for non-stateowned rms corporate ownership dispersion is negatively related
to the level of corporate social responsibility.
The result on the relation between corporate sustainability
performance and international listing status is consistent with our
expectation and with the results of Hackston and Milne (1996) and
Haniffa and Cooke (2005). It is, however, contrary to the ndings of
Chu et al. (2013), who found a non-signicant relationship in China.
Chu et al. explain the non-signicance of the relationship with the
fact that China is in the early stages of trying to balance economic
and sustainability interests. Contrary to China, Brazil is more
developed than commonly thought in terms of CS, often exceeding
standards in some high-income countries/regions (Baskin, 2006).
Baskin (2006) investigated the extent of corporate sustainability
uptake in leading emerging markets, and concluded that not only
were some emerging market companies taking an active interest in
corporate sustainability, but also a number are among the global
leaders (especially in South Africa and Brazil).
This nding on the signicance of international listing status
suggests that in countries with poor investor protection and less
developed capital markets, the benets from improving governance through corporate sustainability involvement is perceived as
smaller. A recent study on the relationship between corporate
sustainability and rm performance in Brazil reported a signicant
negative correlation between corporate sustainability and rm
value as well as a neutral relationship between corporate sustainability and accounting measures of nancial performance
(Crisstomo et al., 2011). These authors conclude that external
stakeholders are probably not completely aware of the engagement
of Brazilian rms in corporate sustainability so as to have their
decisions of consumption or investment positively inuenced by
corporate sustainability. The case is not the same in more developed countries, such as the USA, where recent studies have shown
the existence of a positive relation between corporate sustainability
performance and rm performance (e.g., Cheung, 2011; Consolandi
et al., 2009). The need of companies both listed on Bovespa and on
foreign capital markets to adapt to the requirements and expectations of stakeholders in other countries explains the better CSP
presented by these companies.
6. Summary and conclusions
This study analyzed the determinants of corporate sustainability
performance by Brazilian companies. We examined a sample of
listed Brazilian companies and used proxies for explanatory factors
in terms of company characteristics, such as size, protability,
leverage, ownership concentration and international listing status.
The empirical analysis relies on the Brazilian listed rms with information available at the Worldscope database at the end of 2010.
These rms are classied into two groups, depending on whether
they belong or not to the Bovespa Corporate Sustainability Index.
This classication gives rise to our dependent variable, a proxy for
the level of corporate sustainability performance.
Findings suggest that Brazilian leading corporate sustainability
performance rms are signicantly larger and have a larger return
on equity than non-leading corporate sustainability performance
rms, which is consistent with previous ndings for US rms
(Artiach et al., 2010). Additionally, results provide evidence that
leading CSP rms have lower ownership concentration and are

more likely to have an international listing status than non-leading

CSP rms. These ndings on the relationship between the way a
rm is nanced and CSP are noteworthy. Li and Zhang (2010)
already show that it is important to consider ownership type in
assessing CS in emerging markets, such as China. We provide new
empirical evidence on the importance of ownership concentration
and international listing status in explaining CSP in emerging
markets.
Given that we focus on the Brazilian institutional setting, our
ndings cannot be generalized to other countries. This is true both
in the case of countries with low ownership concentration and high
investor protection (such as the USA) and in the case of countries
where state ownership is a feature in corporate sector (such as
China). Cross-country studies extending the theoretical framework
by including social and cultural factors inuencing CSP represent an
interesting avenue for further research. As evidenced by the difference in the results of our study and the study of Chu et al. (2013)
pertaining to the signicance of international listing, further
studies including emerging markets with different contextual
characteristics (such as Brazil and China) are needed.
Another interesting avenue for further research is the analysis of
the inuence of state ownership and foreign ownership on CSP.
Amran and Haniffa (2011) have analyzed the inuence of these
variables on sustainability reporting in Malaysia and found that
they are non-signicant. In the case of Chinese rms, Chu et al.
(2013) report a negative relationship between state ownership
and greenhouse gas reporting. Similar to China, state ownership is a
feature in the Malaysian corporate sector (Chu et al., 2013). In the
case of Brazil, where state-ownership is not as important, an
enlarged sample including other rms besides listed rms would
be necessary to analyze thoroughly these matters.
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