Optimal Model to Predict the Sustainability of Taiwanese Firms

The increasing growth of the global population has brought forth greater demand for the goods and services, making the sustainability of a firm, the prediction of it, and whether environment plays a very important role in the sustainability of a firm are among the most important current issues that every business must face. This paper first constructs a new index, called the sustainability index, based on economic, environmental, and social criteria by employing a corporate credit risk index, an evaluation of a firm’s corporate governance, corporate financial performance, and firm age. We apply both Multiple Regression Analysis (MRA) and Fuzzy set Qualitative Comparative Analysis (FsQCA) to obtain the optimal models for predicting a firm’s sustainability. Our analysis shows that the variables including financial leverage, slack, innovation capability, manufacturing capability, and human capital have a significant influence on the sustainability of firms. Our fsQCA analysis obtains configurations of several factors for the sustainability index. The best solution shows that in order to obtain a firm’s high sustainability, three variables (innovation capability, marketing capability, and organizational slack) should be low. Overall, the results from all four variables in the sustainability index are important in the models and our proposed models fit the data very well. The results from our construction of the sustainability index and our analysis by using both multiple regression and fsQCA analyses concludes that environmental factors do play very important roles in the sustainability of a firm. Our findings are useful for academics, managers, and policy makers to predict and maintain a firm’s sustainability.