The Non-linear Relation between ESG Sustainability Performance and Growth Opportunity with an emphasis on Financial Constraints

The factor affecting investors' decisions is the company's growth opportunities, which factors such as environmental, social and governance (ESG) sustainability performance are effective in improving it by creating the trust of current and future shareholders. By increasing the level of ESG performance, the risk level of the shareholders will decrease and will have a negative effect on the growth opportunity. Also, in different financial conditions, managers' decisions to perform ESG performance are different. The purpose of this research is to investigate the non-linear effects of ESG sustainability performance on growth opportunities by considering financial constraints in companies listed in the Tehran Stock Exchange. The sample consists of 130 companies in the period 2014-2021. For testing hypotheses, multivariable regression model and Eviews software version 14.have been used. Research findings show that sustainability performance has an inverted U-shaped relationship with the company's growth opportunities, and the environmental dimension and corporate governance have a more important impact than the social dimension. Also, in financially constrained companies, the relationship becomes positive linear. Therefore, considering that the importance of ESG is expected to increase following the current social problems, it is suggested to design and manage ESG sustainability practices in companies. Therefore, managers should pay more attention not only to strategic features such as ESG performance, but also to its potential to enhance future growth opportunities for their companies.