Sustainable business development through sufficiency economy practice : a case study of Thai listed companies

Abstract

The purpose of the research is to determine the sufficiency economy philosophy (SEP) performance through annual and sustainable development reports and simplify the outcomes by representing through a scoring system. Each of the SEP elements was aligned with each GRI sub-topic to generate a SEP scoring system. Then, the results from the scoring system were verified by testing the relationship between SEP performance and firm-specific risk of 34 Thai listed companies from 2013 to 2018 via panel data analysis. The global reporting initiative (GRI) standards were used as the fundamental scoring system as it's widely used and accepted in academic and business sectors. Univariate analysis results suggested that firms with high SEP scores generated a higher return on equity and paid a higher dividend payout ratio to the shareholders. The SEP scores were used to test two hypotheses of risk reduction and managerial opportunism. The hypotheses were tested using fixed effects regression and the results supported the risk reduction hypothesis and this practicing SEP reduced firm-specific risk. To validate the results, a two-stage least squares instrumental variable (2SLS-IV) analysis was performed to estimate the causal relationship between SEP performance and firm-specific risk. The results remained negatively and significantly correlated, indicating that SEP practice stimulated business sustainability. The findings suggested that the SEP scoring system was able to capture SEP performance and practicing SEP appeared to reduce firm-specific risk, which was consistent with the risk reduction hypothesis of the stakeholder theory. In summary, The SEP practice had a significant impact on reducing firm-specific risk and increased firm profitability. Implementing SEP can lead firms toward sustainability and increase strength from adopting the SEP three cores and two underlying conditions.