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Abstract - Quest for Global Competitiveness - Universidad de Puerto ...

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7structure (McPeak & Tooley 2008). Improvements in any of these increase ROE, aslong as returns exceed the financing costs of <strong>de</strong>bt.The results <strong>for</strong> the ROE measure were similar to those of the excess returns.The average increase in ROE <strong>for</strong> the United States DJSI companies was greater thanthe average increase in ROE <strong>for</strong> the S&P 500 <strong>for</strong> the period un<strong>de</strong>r study (McPeak &Tooley 2008). This evi<strong>de</strong>nce supports the hypothesis that corporate sociallyresponsible lea<strong>de</strong>rs do per<strong>for</strong>m better financially.Jones, Frost, Loftus, and Van Der Laan (2007) per<strong>for</strong>med a similar study <strong>for</strong> thecountry of Australia. However, in this case, the relationship between sustainabilityreporting and financial per<strong>for</strong>mance was reversed to <strong>de</strong>termine if superiorly per<strong>for</strong>mingcompanies engage in sustainability reporting. A sustainability in<strong>de</strong>x was <strong>de</strong>veloped,based on GRI gui<strong>de</strong>lines, <strong>for</strong> the top 100 publicly listed companies in Australia. Thefinancial per<strong>for</strong>mance variables inclu<strong>de</strong>d ROE and other ratios based on financialstatement data. The results were a significantly positive relationship between mostmeasures of financial per<strong>for</strong>mance and sustainability reporting (Jones, Frost, Loftus, &Van Der Laan 2007).In another research about Australian companies, Kristoffersen, Gerrans, andClark-Murphy (2008) conclu<strong>de</strong>d that higher corporate social per<strong>for</strong>mance ratings (basedon a five point scale) led to better per<strong>for</strong>mance. Their study controlled <strong>for</strong> differences inindustry groups and found that companies in the banking, diversified financials,insurance, and telecommunications industries showed the best financial per<strong>for</strong>mance.When consi<strong>de</strong>ring the combined evi<strong>de</strong>nce between the United States study(McPeak & Tooley 2008) and those of Australia (Jones, Frost, Loftus, & Van Der Laan2007; Kristoffersen, Gerrans, & Clark-Murphy 2008), it suggests that there is a positiverelationship between sustainability reporting and financial per<strong>for</strong>mance. However, it isnot possible to infer the direction of this relationship: whether it is that sustainabilityreporting drives financial per<strong>for</strong>mance or whether it is superior financial per<strong>for</strong>mancewhat leads to higher quality sustainability reporting. In addition, since both are singlecountry studies, the findings may not be generalized to all world regions.A more recent paper presents evi<strong>de</strong>nce that seems to contradict the be<strong>for</strong>ementioned findings (Nelling & Webb 2009). This study refers to a “virtuous cycle”, in

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