Corporate social responsibility and financial performance: Does country sustainability matter?

Drawing on stakeholder and institutional theoretical frameworks, this study aims to examine how corporate social performance (CSP) impacts corporate financial performance (CFP) and the moderating role of country sustainability and its environmental (ENV), social (SOC) and governance (GOV) dimensions. Using a broad international sample with firms from 47 countries?and through multilevel and panel data analysis?results show a positive and significant influence of CSP on CFP, while country sustainability negatively moderates the CSP-CFP relationship. This is consistent with the idea that in countries with a high level of sustainability, firms have greater difficulty obtaining competitive advantages through actions related to corporate social responsibility. Results also indicate that country sustainability has a direct and positive impact on CFP (Tobin's-Q), regardless of CSP. Additionally, applying country sustainability in a disaggregated manner, we find that social and governance dimensions influence the CSP-CFP relationship, while the environmental dimension does not. Evidence thus confirms that the effect of CSP on CFP varies depending on the institutional context in which the firm is located.