Reinforcing corporate sustainability in times of crisis: a legitimacy perspective of resilience

Purpose Despite growing attention to sustainability, ambiguity remains regarding whether maintaining such initiatives during corporate financial crises may strain resources needed for recovery. Drawing on legitimacy theory and resilience perspectives, this study aims to examine how reinforcing corporate sustainability performance during a crisis influences recovery speed, the mediating role of investor commitment and the moderating influence of the economic environment. Design/methodology/approach Using secondary data from the LSEG Refinitiv database covering 190 firms across multiple industries over an eight-year period, this study applies regression, mediation and moderation analyses to assess how reinforcing corporate sustainability performance during a corporate financial crisis (i.e. a period in which a firm’s Altman Z-score falls below 2.99) affects recovery speed. Findings Firms reinforcing sustainability performance during crises recover faster. Investor commitment acts as a key mediator by providing capital, confidence and strategic support. The economic environment moderates this relationship: in hostile contexts, sustainability helps retain investor commitment, while in munificent environments, investor support strongly boosts recovery. Research limitations/implications Future research should explore how other stakeholders mediate the sustainability–recovery relationship. The authors contribute to the legitimacy and sustainability literature by theoretically identifying and empirically analyzing the specific way in which sustainability may enhance recovery from a crisis through investor commitment. Practical implications The results provide solid evidence for managers to get sustainability-related tools to speed the recovery from a corporate financial crisis. Contrary to popular beliefs, this manuscript will encourage the executives in financially difficult situations to reinforce investors’ commitment through internally demanding sustainability practices. The authors also expand implications to policymakers and investors to consider the impact of sustainability in times of crisis. Originality/value To the best of the authors’ knowledge, this is the first study to investigate how reinforcing corporate sustainability performance during corporate financial crises accelerates recovery time.