The Effect of Corporate Sustainability Performance on the Speed of Achieving the Optimal Capital Structure: The Generalized Moments Approach

The capital structure adjustment speed indicates the movement of companies towards the optimal capital structure. The optimal financial leverage is said to be a combination that is affected by the correct and targeted use of financial resources and the acquisition of reasonable and suitable returns with the risks of these resources. The present study seeks to track the effect of corporate sustainability performance on the speed of achieving the optimal capital structure. A sample of 136 listed companies on the Tehran stock exchange selected according to the systematic exclusion pattern was collected for 13 years from 2010 to 2022 to achieve the research objectives. A multivariate regression model with the generalized moments approach (GMM) was used to test the research hypotheses. The results showed that the circuits with higher stability performance could quickly cover the distance between the actual capital structure and the target and achieve optimal capital structure. Therefore, it is essential to address the level of corporate sustainability performance in capital structure and its optimization. The current study provided evidence that a company’s sustainability performance a comprehensive approach reflecting total effects plays a crucial role, potentially serving as the central pillar of its capital structure. Moreover, access to financing sources should be adequate.