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Are sustainable firms more profitable during COVID-19? Recent global evidence of firms in developed and emerging economies

Jing Lu (University of Guelph, Guelph, Canada)
Shahid Khan (Penn State Berks, Reading, Pennsylvania, USA)

Asian Review of Accounting

ISSN: 1321-7348

Article publication date: 5 December 2022




This paper investigates whether sustainability performance (SP) protects financial performance (FP) for firms in both developed and emerging economies during the COVID-19-induced economic downturn.


Using a recent sample of firms in 34 countries between 2003 and 2021, the authors employ ordinary least squares regressions, moderations and the Heckman two-step method to test the hypotheses.


Firms with strong SP have higher FP in developed and emerging economies in the upcoming year. During the COVID-19 crisis in 2020–2021, the impact of sustainability on FP is pronounced in developed but not in emerging economies. Furthermore, cross-listings expose firms in emerging economies to high-standard institutional mechanisms in developed economies. Thus, sustainable firms in emerging economies cross-listed on European stock exchanges are more profitable.

Practical implications

For regulators and standard setters, the global-level comparative analysis helps them find solutions that may assist firms in improving SP globally (e.g. mandatory reporting) and enduring crises resiliently. For institutional investors, the study reveals the relatively different impact of sustainability risk for firms in developed and emerging economies. For practitioners and private sector firms, this study contributes to the dialogue on what makes firms more resilient in COVID-19. Although COVID-19 might be temporary, the lessons learned could protect firms from future crises.


The authors contribute to the contingency perspective between sustainability and financial performance by providing recent empirical evidence in a global setting during the COVID-19 pandemic. The authors demonstrate how different external institutional mechanisms (rule-based governance and relation-based governance) and cross-listing affect the SP-FP relationship during a crisis. The authors extend the knowledge in crisis management literature with a comparative study and fill the research gap on how SP affects FP for firms in emerging economies compared to developed economies.



Funding: This paper has been funded by the Social Sciences and Humanities Research Council of Canada (SSHRC) Insight Development Grants (IDG).


Lu, J. and Khan, S. (2022), "Are sustainable firms more profitable during COVID-19? Recent global evidence of firms in developed and emerging economies", Asian Review of Accounting, Vol. ahead-of-print No. ahead-of-print.



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