Sustainability performance at stake during COVID-19 pandemic? Evidence from Sharia-compliant companies in emerging markets

Purpose: This study aims to analyse whether Sharia-compliant companies have better sustainability performance, especially in the midst of the COVID-19 pandemic. The pandemic context is worth investigating as there is a concern that companies will reduce their sustainability activities to focus more on economic recovery, thereby leading to lower sustainability performance. Design/methodology/approach: This study uses data from companies listed on Indonesian and Malaysian stock exchanges. These two countries have experienced rapid developments in Islamic finance and possess similar criteria in assigning the Sharia compliance label to a company. The data on sustainability performance and its three dimensions (environmental, social and governance) were gathered from Refinitiv (Thomson Reuters) and analysed using panel data regression. Findings: The results show that Sharia-compliant companies had a higher sustainability performance in all research periods, but not during the COVID-19 pandemic. This implies that the pandemic has not triggered a need for Sharia-compliant companies to improve their sustainability performance. The results can be interpreted that sustainability performance is not only at stake during the COVID-19 pandemic but it can also indicate a "business-as-usual” approach applied by companies regardless of the Sharia-compliant label. Originality/value: Sustainability performance has been intensively investigated in prior research, but how it is related to the current health crisis and Sharia compliance has been scantily studied and becomes the originality of this research. © 2022, Emerald Publishing Limited.

Can intellectual capital contribute to financial and non-financial performances during normal and crisis situations?

The contribution of intellectual capital (IC) on financial performance have been found in previous studies but whether IC can also be utilised to improve non-financial performance has been understudied;let alone the contributions in different economic conditions (normal and crisis periods). This study aims to provide empirical findings to answer these issues by defining non-financial performance in terms of the environmental, social, and governance (ESG) performance and COVID-19 pandemic to represent the crisis. Non-financial companies listed on stock exchanges in the Southeast Asia countries that are member of ASEAN (Association of Southeast Asian Nations) were selected as the samples for the research period of 2016-2020. The results show that the IC has a positive association with financial performance but a negative relationship with ESG performance. With the COVID-19 pandemic as the moderating variable, the results show that the pandemic period is not found to moderate the effect of the IC on financial performance and ESG performance. These results indicate that under normal conditions prior to the economic crisis caused by COVID-19, companies in Southeast Asia prioritised the use of IC to improve financial performance. Meanwhile, during the COVID-19 pandemic, companies in the region have not utilised IC to improve their financial and non-financial performance. The findings that IC affect ESG performance negatively need a serious attention amid the increasing awareness of sustainability and the expected role of corporate in the achievement of the Sustainable Development Goals (SDGs).