Social Reporting by Islamic Banks: The Role of Sharia Supervisory Board and the Effect on Firm Performance
Abstract
:1. Introduction
2. Literature Review
2.1. Theoretical Background
2.2. Hypotheses Development
2.2.1. Islamic Governance Score and Islamic Social Reporting
Existence of Sharia Supervisory Board and Islamic Social Reporting
Size of the Sharia Supervisory Board and Islamic Social Reporting
Cross-Membership of the Sharia Supervisory Board and Islamic Social Reporting
Educational Background of Sharia Supervisory Board and Islamic Social Reporting
Education Level (Ph.D. Qualification) of the Sharia Supervisory Board and Islamic Social Reporting
The Reputation of the Sharia Supervisory Board and Islamic Social Reporting
2.2.2. Islamic Social Reporting and Firm Performance
3. Materials and Methods
3.1. Data and Sample
3.2. Variables Measurement
3.2.1. Measurement of Islamic Social Reporting
- ISRI = Islamic social reporting index for the firm i and the year t
- N = The number of items in the index
- J = Each item included in the index
3.2.2. Measurement of Firm Performance
3.2.3. Measurement of the Sharia Supervisory Board
3.2.4. Measurement of Control Variables
3.3. Regression Models
- Model 1
- Model 2
- Model 3
4. Analysis of Results and Discussion
4.1. Descriptive Statistics Analysis
4.2. Correlation Analysis
4.3. An Empirical Analysis for Determinants of Islamic Social Reporting
4.4. An Empirical Analysis of the Effect of Islamic Social Reporting on Firm Performance
5. Conclusions
Author Contributions
Funding
Institutional Review Board Statement
Informed Consent Statement
Data Availability Statement
Conflicts of Interest
Appendix A
No. | Islamic Bank | Countries |
---|---|---|
1 | Al Rajhi Bank | Saudi Arabia |
2 | Dubai Islamic Bank | UAE |
3 | Kuwait Finance House | Kuwait |
4 | Maybank Islamic Berhad | Malaysia |
5 | Qatar Islamic Bank | Qatar |
6 | Abu Dhabi Islamic Bank | UAE |
7 | Alinma Bank | Saudi Arabia |
8 | Parsian Bank | Iran |
9 | Masraf Al Rayan Bank | Qatar |
10 | Bank Rakyat | Malaysia |
11 | Al Baraka Islamic Bank | Bahrain |
12 | CIMB Islamic Bank | Malaysia |
13 | Bank Albilad | Saudi Arabia |
14 | Bank Aljazira | Saudi Arabia |
15 | Emirates Islamic Bank | UAE |
16 | RHB Islamic Bank | Malaysia |
17 | Bank Islam Malaysia | Malaysia |
18 | Public Islamic Bank | Malaysia |
19 | Boubyan Bank | Kuwait |
20 | Noor Bank | UAE |
21 | Qatar International Islamic Bank | Qatar |
22 | Barwa Bank | Qatar |
23 | Sharjah Islamic Bank | UAE |
24 | Al Hilal Bank | UAE |
25 | Islamic Bank Bangladesh | Bangladesh |
26 | Ambank Islamic | Malaysia |
27 | MBSB Bank | Malaysia |
28 | Ithmaar Bank | Bahrain |
29 | Hong Leong Islamic Bank | Malaysia |
30 | Bank Islam Brunei Darussalam | Brunei |
31 | Warba Bank | Kuwait |
32 | Kuwait International Bank | Kuwait |
33 | Bank Syariah Mandiri | Indonesia |
34 | Meezan Bank | Pakistan |
35 | Ajman Bank | UAE |
36 | Affin Islamic Bank | Malaysia |
37 | Jordan Islamic Bank | Jordan |
38 | Bank Muamalat Malaysia | Malaysia |
39 | Faisal Islamic Bank | Egypt |
40 | HSBC Amanah Malaysia | Malaysia |
41 | Sina Bank | Iran |
42 | Al Salam Bank | Bahrain |
43 | First Security Islami Bank | Bangladesh |
44 | Export ImportBank of Bangladesh | Bangladesh |
45 | Kuwait Finance House of Bahrain | Bahrain |
46 | Al Arafah Islami Bank | Bangladesh |
47 | Bank Muamalat Indonesia | Indonesia |
48 | OCBC Al Amin Bank | Malaysia |
49 | Al Baraka Bank Egypt | Egypt |
50 | Bahrain Islamic Bank | Bahrain |
51 | Islamic International Arab Bank | Jordan |
52 | Shahjalal Islami Bank | Bangladesh |
53 | BNI Syariah | Indonesia |
54 | Abu Dhabi | Egypt |
55 | BRI Syariah | Indonesia |
56 | Al Rayan | United Kingdom |
57 | Nizwa | Oman |
58 | Khaleeji | Bahrain |
59 | Kuwait Finance | Malaysia |
60 | Al Baraka | Bahrain |
61 | Saadiq | Malaysia |
62 | Alizz Islamic | Oman |
63 | Union Bank Bangladesh | Bangladesh |
64 | ABC Islamic Bank | Bahrain |
65 | Dubai Islamic Bank Pakistan | Pakistan |
66 | Bank Aceh Syariah | Indonesia |
67 | Safwa Islamic Bank | Jordan |
68 | Bank Islami Pakistan | Pakistan |
69 | Arab Islamic Bank | Palestine |
70 | Qatar First Bank | Qatar |
71 | Bank Tabungan Pensiunan Nasional Syariah | Indonesia |
72 | First Energy Bank | Bahrain |
73 | MCB Islamic Bank | Pakistan |
74 | Bank Panin Dubai Syariah | Indonesia |
75 | Bank BCA Syariah | Indonesia |
76 | Albaraka Bank | South Africa |
77 | Bank Jabar Banten Syariah | Indonesia |
78 | Bank Syariah Bukopin | Indonesia |
79 | Ibdar Bank | Bahrain |
80 | Cham Islamic Bank | Syria |
81 | Jaiz Bank | Nigeria |
82 | Venture Capital Bank | Bahrain |
83 | Maldives Islamic Bank | Maldives |
84 | Bank Victoria Syariah | Indonesia |
85 | Liquidity Management Centre | Bahrain |
86 | Global Banking Corporation | Bahrain |
87 | United Capital Bank | Sudan |
88 | ICB Islamic Bank | Bangladesh |
89 | Bank Maybank Syariah Indonesia | Indonesia |
90 | Citi Islamic Investment Bank | Bahrain |
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Variables | Definition | Measurement |
---|---|---|
ISRI | Islamic social reporting index | The ratio of content disclosure score over the maximum score a bank can achieve |
Individual dimension | Individual dimension refers to six dimensions of ISR | Mission and vision (MV.ISR 9 items); products and services (PS.ISR 10 items); zakah, charity and benevolent fund (ZCBF.ISR 15 items); commitment towards employees (EMPLYS.ISR 10 items); commitment towards debtors (DEBT.ISR 5 items); and commitment towards community (CMUNTY.ISR 7 items) |
FP |
| ROA (the ratio of net income/total assets) and MTBV (the market value of equity to book value of equity ratio); TQ (the ratio of market value of equity and liabilities/book value of equity and liabilities) |
IG-Score | Islamic governance score | Existence of SSB (dichotomous yes/no) + size of SSB (1 for bank with 7 or more members, and 0 otherwise) + cross-membership (1: if any SSB member with cross-membership, and 0 otherwise) + sharia and economics background (1: if any SSB member with educational background in sharia and economics, and 0 otherwise) + doctoral qualification (1: if any SSB member with doctorate qualification, and 0 otherwise) + reputation of SSB (1: if any SSB member as AAOIFI member, and 0 otherwise) |
Exist.SSB | Existence of SSB | Dichotomous yes/no |
Size.SSB | Size of SSB | The overall number of SSB members at the end of every year |
Cross.SSB | SSB members with cross-membership | The number of SSB members who sit on SSB of other Islamic banks at the same time |
Educ.SSB | SSB members with educational background in sharia and economics | The number of SSB members with dual certification in sharia and in economics |
PhD.SSB | SSB members with doctoral qualifications | The number of SSB members who hold a doctoral degree |
Rep.SSB | Reputation of SSB members as AAOIFI members | The number of SSB members sitting on international sharia standard-setting organizations AAOIFI |
F.Size | Firm size | The natural logarithm of firms’ total assets |
F.Age | Firm age | The number of years elapsed since the year of the company’s IPO |
F.Lev | Firm leverage | The ratio of total debt/total equity |
F.Liquid | Firm liquidity | The ratio of current assets/current liabilities |
GDP | Growth domestic products | The natural logarithm of sample countries GDP |
Variables | Obs. | Mean | Std. Dev. | Min | Max |
---|---|---|---|---|---|
Panel A: Model 1. | |||||
ISRI | 450 | 0.4150 | 0.2185 | 0.3571 | 0.9946 |
IG-Score | 450 | 2.6244 | 1.4060 | 0 | 6 |
Exist.SSB | 450 | 0.8161 | 0.3879 | 0 | 1 |
Size.SSB | 450 | 3.5245 | 2.4337 | 0 | 12 |
Cross.SSB | 450 | 0.3030 | 0.7435 | 0 | 3 |
Educ.SSB | 450 | 1.5921 | 1.9405 | 0 | 8 |
PhD.SSB | 450 | 2.2844 | 1.7030 | 0 | 7 |
Rep.SSB | 450 | 0.5035 | 0.9413 | 0 | 4 |
Size | 450 | 8.1421 | 1.7399 | 2.5635 | 11.736 |
Age | 450 | 21.522 | 14.784 | 1 | 66 |
Leverage | 450 | 0.9841 | 1.2648 | 0.1164 | 8.7908 |
Liquidity | 450 | 2.6167 | 2.6501 | 0.2931 | 10.1635 |
GDP | 450 | 12.201 | 1.2812 | 8.2276 | 14.880 |
Panel B: Model 2 and 3. | |||||
ROA | 215 | 0.0161 | 0.0127 | 0.0007 | 0.0705 |
MTBV | 215 | 1.5171 | 0.7073 | 0.6100 | 2.762 |
TQ | 215 | 0.5377 | 0.2722 | 0.0537 | 0.9238 |
ISRI | 215 | 0.4150 | 0.2185 | 0.3571 | 0.9946 |
MV.ISR | 215 | 4.0378 | 2.7373 | 0 | 9 |
PS.ISR | 215 | 3.6311 | 2.8733 | 0 | 10 |
ZCBF.ISR | 215 | 5.4622 | 3.6973 | 0 | 14 |
EMPLYS.ISR | 215 | 4.7533 | 2.9666 | 0 | 10 |
DEBT.ISR | 215 | 0.9977 | 1.4260 | 0 | 5 |
CMUNTY.ISR | 215 | 2.5267 | 1.7507 | 0 | 6 |
Panel A: Model 1. | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
ISRI | IG- Score | Exist. SSB | Size. SSB | Cross. SSB | Educ. SSB | PhD. SSB | Rep. SSB | Size | Age | Lev | Liq | GDP | |||
ISRI | 1.000 | ||||||||||||||
IG-Score | 0.1466 | 1.000 | |||||||||||||
Exist.SSB | 0.1182 | 0.0242 | 1.000 | ||||||||||||
Size.SSB | 0.2464 | 0.0680 | 0.2904 | 1.000 | |||||||||||
Cross.SSB | 0.2503 | 0.0175 | 0.1067 | 0.1599 | 1.000 | ||||||||||
Educ.SSB | 0.3383 | 0.0802 | 0.1339 | 0.3576 | 0.4875 | 1.000 | |||||||||
PhD.SSB | 0.2208 | 0.0581 | 0.3052 | 0.6252 | 0.1920 | 0.4368 | 1.000 | ||||||||
Rep.SSB | 0.1414 | 0.2127 | 0.1227 | −0.0166 | 0.1053 | −0.1572 | 0.0475 | 1.000 | |||||||
Size | 0.2695 | 0.1002 | −0.2159 | 0.1327 | 0.0757 | 0.0928 | 0.2196 | 0.2239 | 1.000 | ||||||
Age | −0.0363 | −0.0930 | −0.1110 | 0.0389 | −0.0638 | 0.0455 | 0.1311 | 0.0690 | 0.0844 | 1.000 | |||||
Leverage | −0.1797 | −0.0160 | −0.0906 | −0.0283 | −0.0333 | −0.1143 | −0.0808 | 0.1258 | −0.4507 | 0.0207 | 1.000 | ||||
Liquidity | −0.1547 | −0.0753 | 0.0144 | −0.1032 | −0.1327 | −0.0776 | −0.1505 | −0.1939 | −0.0393 | 0.1295 | −0.3436 | 1.000 | |||
GDP | 0.0794 | 0.0688 | −0.0681 | −0.0343 | −0.1925 | 0.0424 | −0.0990 | −0.0955 | 0.2695 | 0.0846 | −0.1959 | 0.1118 | 1.000 | ||
Panel B: Model 2 and 3. | |||||||||||||||
ROA | MTBV | TQ | ISRI | MV.ISR | PS.ISR | ZCBF.ISR | EMPLYS.ISR | DEBT.ISR | CMUNTY.ISR | Size | Age | Lev | Liq | GDP | |
ROA | 1.000 | ||||||||||||||
MTBV | −0.1527 | 1.000 | |||||||||||||
TQ | −0.0730 | 0.3121 | 1.000 | ||||||||||||
ISRI | −0.3262 | 0.0434 | 0.2235 | 1.000 | |||||||||||
MV.ISR | −0.3365 | −0.3089 | 0.1104 | 0.6456 | 1.000 | ||||||||||
PS.ISR | −0.3024 | 0.1454 | 0.1256 | 0.7077 | 0.6882 | 1.000 | |||||||||
ZCBF.ISR | −0.3255 | 0.1521 | 0.1244 | 0.5038 | 0.7764 | 0.7614 | 1.000 | ||||||||
EMPLYS.ISR | −0.2430 | −0.2091 | 0.1792 | 0.5934 | 0.7433 | 0.7092 | 0.7838 | 1.000 | |||||||
DEBT.ISR | −0.2061 | 0.0801 | 0.0189 | 0.6272 | 0.7631 | 0.7724 | 0.6110 | 0.6637 | 1.000 | ||||||
CMUNTY.ISR | −0.2002 | 0.0783 | 0.1480 | 0.3637 | 0.6187 | 0.6363 | 0.6511 | 0.5450 | 0.4695 | 1.000 | |||||
Size | −0.1239 | −0.0742 | −0.1262 | −0.2915 | −0.2480 | −0.1378 | −0.1279 | −0.3063 | −0.0989 | 0.2405 | 1.000 | ||||
Age | 0.1250 | 0.0958 | 0.1819 | −0.3364 | −0.3696 | −0.3410 | −0.3880 | −0.4628 | −0.2714 | −0.3107 | 0.0729 | 1.000 | |||
Leverage | 0.4909 | −0.0817 | −0.0893 | 0.0385 | −0.1218 | −0.1175 | −0.2575 | −0.1484 | −0.0326 | −0.3231 | −0.4207 | 0.2574 | 1.000 | ||
Liquidity | −0.1504 | 0.2279 | −0.2464 | −0.2514 | −0.1919 | −0.2024 | −0.1046 | 0.0086 | −0.2023 | −0.1260 | 0.1335 | 0.0295 | −0.2197 | 1.000 | |
GDP | 0.3542 | 0.1621 | 0.1661 | −0.2819 | −0.3022 | −0.3382 | −0.4319 | −0.3467 | −0.2306 | −0.3740 | −0.0864 | 0.2362 | 0.4339 | −0.2757 | 1.000 |
Variable | Model 1 (ISRI) | ||
---|---|---|---|
2016–2020 | 2016–2019 | 2020 | |
IG-Score | 0.0240 (0.000) *** | 0.0222 (0.003) *** | 0.0217 (0.054) * |
Exist.SSB | 0.1085 (0.000) *** | 0.1093 (0.001) *** | 0.1068 (0.019) ** |
Size.SSB | 0.0078 (0.012) ** | 0.0070 (0.019) ** | 0.0106 (0.076) * |
Cross.SSB | 0.0411 (0.005) *** | 0.0410 (0.013) ** | 0.0392 (0.098) * |
Educ.SSB | 0.0156 (0.011) ** | 0.0172 (0.013) ** | 0.0110 (0.079) * |
Ph.D.SSB | 0.0104 (0.170) | 0.0089 (0.296) | 0.0144 (0.248) |
Rep.SSB | 0.0667 (0.000) *** | 0.0618 (0.000) *** | 0.0763 (0.000) *** |
Size | 0.0425 (0.000) *** | 0.0440 (0.000) *** | 0.0377 (0.002) *** |
Age | 0.0004 (0.560) | 0.0004 (0.537) | 0.0004 (0.695) |
Leverage | −0.0031 (0.739) | −0.0014 (0.891) | −0.0131 (0.379) |
Liquidity | −0.0141 (0.000) *** | −0.0115 (0.008) *** | −0.0226 (0.000) *** |
GDP | −0.0008 (0.923) | −0.0013 (0.887) | −0.0071 (0.569) |
R2 (Between) | 0.2714 | 0.2637 | 0.2626 |
Probability F-Stat | 0.0000 | 0.0000 | 0.0000 |
Variable | Model 2 (ROA) | Model 3 (ROA) | ||||
---|---|---|---|---|---|---|
2016–2020 | 2016–2019 | 2020 | 2016–2020 | 2016–2019 | 2020 | |
ISRI | −0.0068 (0.011) ** | −0.0078 (0.010) ** | −0.0080 (0.008) *** | |||
MV.ISR | −0.0087 (0.009) *** | −0.0091 (0.015) ** | −0.0062 (0.251) | |||
PS.ISR | −0.0003 (0.993) | −0.0009 (0.701) | −0.0004 (0.518) | |||
ZCBF.ISR | −0.0029 (0.155) | −0.0035 (0.127) | −0.0061 (0.862) | |||
EMPLYS.ISR | −0.0055 (0.102) | −0.0038 (0.299) | −0.0013 (0.232) | |||
DEBT.ISR | 0.0050 (0.362) | 0.0043 (0.488) | 0.0049 (0.589) | |||
CMUNTY.ISR | 0.0089 (0.142) | 0.0011 (0.115) | 0.0039 (0.589) | |||
Size | −0.0019 (0.000) *** | −0.0021 (0.000) *** | −0.0015 (0.054) * | −0.0021 (0.000) *** | −0.0023 (0.000) *** | −0.0014 (0.007) *** |
Age | 0.010 (0.009) *** | 0.0010 (0.015) ** | 0.0010 (0.026) ** | 0.0007 (0.047) ** | 0.0007 (0.041) ** | 0.0010 (0.094) * |
Leverage | 0.0015 (0.003) *** | 0.0010 (0.078) * | 0.0020 (0.007) *** | 0.0038 (0.085) * | 0.0036 (0.075) * | 0.0007 (0.089) * |
Liquidity | 0.0002 (0.378) | 0.0010 (0.403) | 0.0002 (0.955) | −0.0017 (0.337) | −0.0018 (0.367) | −0.0017 (0.559) |
GDP | 0.0007 (0.119) | 0.0008 (0.122) | 0.0006 (0.437) | 0.0009 (0.157) | 0.0009 (0.174) | 0.0008 (0.309) |
R2 (Between) | 0.1550 | 0.1593 | 0.1368 | 0.1981 | 0.2109 | 0.1521 |
Probability F-Stat | 0.0000 | 0.0000 | 0.0000 | 0.0000 | 0.0000 | 0.0000 |
Variable | Model 2 (MTBV) | Model 3 (MTBV) | ||||
---|---|---|---|---|---|---|
2016–2020 | 2016–2019 | 2020 | 2016–2020 | 2016–2019 | 2020 | |
ISRI | 1.2577 (0.003) *** | 1.0056 (0.048) ** | 1.6502 (0.010) ** | |||
MV.ISR | −0.1834 (0.001) *** | −0.1787 (0.005) *** | −0.1791 (0.059) * | |||
PS.ISR | 0.0784 (0.184) | 0.0648 (0.321) | 0.0296 (0.844) | |||
ZCBF.ISR | 0.0171 (0.602) | 0.0148 (0.683) | 0.0045 (0.939) | |||
EMPLYS.ISR | −0.1490 (0.749) | −0.1877 (0713) | −0.0725 (0.471) | |||
DEBT.ISR | 0.0524 (0.540) | 0.0405 (0.673) | 0.1951 (0.307) | |||
CMUNTY.ISR | 0.0430 (0.571) | 0.0631 (0.478) | 0.0009 (0.994) | |||
Size | −0.0129 (0.190) | −0.0527 (0.130) | −0.0363 (0.194) | −0.0809 (0.372) | −0.1112 (0.299) | −0.1256 (0.398) |
Age | 0.1386 (0.565) | 0.1209 (0.659) | 0.0104 (0.217) | 0.0031 (0.517) | 0.0046 (0.395) | 0.0008 (0.920) |
Leverage | 0.0036 (0.490) | 0.0050 (0.926) | 0.0103 (0.980) | 0.3398 (0.160) | 0.2613 (0.335) | 0.0397 (0.354) |
Liquidity | 0.0567 (0.110) | 0.0632 (0.117) | 0.0450 (0.468) | 0.0679 (0.164) | 0.0748 (0.166) | 0.0476 (0.484) |
GDP | 0.1727 (0.134) | 0.2405 (0.068) * | 0.0329 (0.863) | 0.1746 (0.146) | 0.2385 (0.076) * | 0.0719 (0.730) |
R2 (Between) | 0.14312 | 0.1354 | 0.1112 | 0.2122 | 0.1608 | 0.2094 |
Probability F-Stat | 0.0003 | 0.0045 | 0.0089 | 0.0241 | 0.0034 | 0.0479 |
Variable | Model 2 (TQ) | Model 3 (TQ) | ||||
---|---|---|---|---|---|---|
2016–2020 | 2016–2019 | 2020 | 2016–2020 | 2016–2019 | 2020 | |
ISRI | 0.4174 (0.014) ** | 0.5124 (0.013) ** | 0.1923 (0.047) ** | |||
MV.ISR | −0.1163 (0.042) ** | −0.1232 (0.060) ** | −0.0164 (0.005) *** | |||
PS.ISR | 0.0107 (0.645) | 0.0052 (0.842) | 0.0514 (0.390) | |||
ZCBF.ISR | 0.0019 (0.147) | 0.0211 (0.159) | −0.0184 (0.433) | |||
EMPLYS.ISR | 0.0347 (0.163) | 0.0344 (0.101) | 0.0123 (0.558) | |||
DEBT.ISR | −0.0195 (0.566) | −0.0109 (0.680) | −0.0758 (0.320) | |||
CMUNTY.ISR | 0.0170 (0.562) | 0.0160 (0.660) | 0.0273 (0.796) | |||
Size | −0.1443 (0.024) ** | −0.0291 (0.100) | −0.0735 (0.235) | −0.0674 (0.063) * | −0.0592 (0.180) | −0.0839 (0.161) |
Age | 0.0057 (0.009) *** | 0.0062 (0.010) ** | 0.0034 (0.005) *** | 0.0055 (0.006) *** | 0.0046 (0.004) *** | 0.0022 (0.003) *** |
Leverage | −0.1010 (0.003) *** | −0.0911 (0.014) ** | −0.0144 (0.033) | −0.3422 (0.121) | −0.0195 (0.560) | −0.0306 (0.857) |
Liquidity | −0.0219 (0.125) | −0.0212 (0.143) | −0.0228 (0.146) | −0.0181 (0.212) | −0.0152 (0.355) | −0.0160 (0.159) |
GDP | −0.0042 (0.197) | −0.0097 (0.203) | −0.0143 (0.265) | −0.0036 (0.139) | −0.0107 (0.284) | −0.0225 (0.408) |
R2 (Between) | 0.2277 | 0.2265 | 0.1861 | 0.1782 | 0.1600 | 0.1958 |
Probability F-Stat | 0.0007 | 0.0005 | 0.0026 | 0.0011 | 0.0053 | 0.0014 |
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Wijayanti, R.; Setiawan, D. Social Reporting by Islamic Banks: The Role of Sharia Supervisory Board and the Effect on Firm Performance. Sustainability 2022, 14, 10965. https://doi.org/10.3390/su141710965
Wijayanti R, Setiawan D. Social Reporting by Islamic Banks: The Role of Sharia Supervisory Board and the Effect on Firm Performance. Sustainability. 2022; 14(17):10965. https://doi.org/10.3390/su141710965
Chicago/Turabian StyleWijayanti, Rita, and Doddy Setiawan. 2022. "Social Reporting by Islamic Banks: The Role of Sharia Supervisory Board and the Effect on Firm Performance" Sustainability 14, no. 17: 10965. https://doi.org/10.3390/su141710965