What environmental and social factors are most relevant to the efficiency and performance of companies? The case of a small bank-oriented country

Purpose This work aims to analyze the factors that influence the performance and efficiency of Portuguese companies, namely the influence of social and environmental features. Design/methodology/approach To achieve our aim, we have used the Portuguese benchmark index, the Portuguese stock index – PSI, during the period from 2016 to 2020. To test the hypothesis panel data methodology was used, specifically, the GMM system originally proposed by Arellano and Bond (1991) and the Value-Based DEA developed by Gouveia et al. (2008). Findings The results of the GMM model show that social performance has a negative relationship with the company’s performance, from the perspective of different stakeholders, reinforcing that the cost-benefit trade-off of social spending is not yet understood as advantageous for the company’s performance. On the other hand, environmental performance, for external stakeholders, positively influences the company’s performance, perhaps due to pressure from society and the tradition of disclosing environmental matters. The value-based DEA results reinforce that from the perspective of the external stakeholder, non-efficient companies must increase their environmental performance to become efficient, highlighting the role of environmental performance in explaining efficiency. It is unanimous that social performance is still not seen as a lever of efficiency. Originality/value This is the first work to use a hybrid methodology to understand the performance determinants of a small banking-oriented country, emphasizing environmental and social aspects.