Impact of Sustainability, Capital Structure & Dividend Policy on Firm Financial Performance: A Cross Cultural Study

Abstract

The objective of this study to examine impact of sustainability, capital structure and dividend policy on firm financial performance of countries in developing countries of the Asian region. The purpose of the present research is to investigate whether there is any significant relationship and what is the direction of relationship sustainability, capital structure and dividend policy with corporate financial performance of developing country firms in the Asian region. The study sampled included 65 firms from 13 countries that lie in the Asian region and 325 observations were selected from every firms’ annual reports and sustainability reports for a period of 2016 to 2020. Panel data regression analysis was utilized with E-Views 10. The residual diagnostics test such as the Hausman test was also applied for selecting Fixed effect regression model. The endogenous variable was firm performance which was measured by ROA, while the exogenous variables were ESG score, Debt ratio (DR), Debt-equity (D/E), Dividend payout (DPO) and Dividend yield (DY). Control variables included were Firm size (FS) and Firm growth (FG). The outcomes of this study revealed that capital structure has a significant negative relation with firm financial performance, while dividend policy indicators had a significant positive relation with corporate performance. This shows that although capital structure and dividend policy critically influence firm performance both positively and negatively. Firm size also shows negative insignificance on firm performance, which tells us that it is also negligible on firm financial position. Firm growth on the other hand positively and critically influences firm position which shows that firm sales performance is directly linked to its financial viability. Future research potential points towards the use larger use of sample size in terms of number of years and higher use of firms which is clearly limited in this research due to lack of countries reporting ESG scores and lack of years of data available.