ESG performance, the cost leadership strategy and financial distress: a multiple mediation model

Abstract

The study was conducted based on a dataset of listed companies in 4 developed market countries and 13 emerging market countries in Asia between 2017 and 2022 with a total of 7428 observations. By estimation methods including: partial least squares path modeling (PLS-SEM) by SmartPLS 4 software along with Logit regression models, logit regression with strong standard error (Logit-Robust); Logit regression by boot technique with 5000 iterations (Logit-Bootstrap) and logit regression estimation by startup technique with 5000 iterations with fixed effect (FEM Logit-Bootstrap) using STATA 17 software. The results provide further evidence for the relationship of business strategy, ESG performance and financial performance (ROA) to a company's likelihood of financial difficulties, thereby providing a broader view of the direct and intermediate drivers of this relationship. In addition, the results show that a cost-effective strategy will improve the ESG performance of the business, while also limiting financial risks for the company. In addition, the above results also contribute to empirical evidence on evolutionary theory of the firm, contingency theory, legitimacy theory, stakeholder theory and resource-based theory.