Financial sustainability: measurement and empirical evidence

Abstract Financial sustainability is underrepresented in both the research on and practice of management reporting. This article proposes a conceptual measure financial examines its association with capital market returns. The positioned at intersection management, risk governance. regarded as crucial control parameter complementing shareholder value can be viewed by risk-averse investors secondary condition investment decisions. It reduces refinancing insolvency risks, leading to risk-adjusted excess returns an imperfect financing restrictions costs. We propose measuring firm’s terms four conditions: (1) firm growth, (2) company’s ability survive, (3) acceptable overall level earnings exposure, (4) attractive profile. show that application conditions-based strategy European firms high (i.e., fulfilling all conditions) over period from July 1990 June 2019 results monthly 0.39%. portfolio’s lower than investment. find increase when incrementally adding each conditions strategy.