Corporate Governance and Sustainability Indexes and Financial Performance

This study aims to analyze whether the investors view the sustainability and corporate governance indexes generated, as a proxy for corporate sustainability performance and a sound corporate governance measure; by examining the effects of inclusion in these indexes on the accounting-based performance measures, and searching for the differences in market’s perception towards these indexes. The findings provide evidence in favor of the stakeholder theory, to the argument that sustainable operations may result in increased sales with the help of increased tendency of customers towards environmental and social issues, thus increasing the financial performance. The results are also in line with the agency theory as although the sustainability and corporate governance indexes increase firms' expenses, the provision of basic principles of corporate governance such as board independence and gender diversity through mandatory regulations is necessary for firm performance.