Strategic corporate sustainability performance of Chinese state-owned listed firms: A meta-frontier generalized directional distance function approach

• Metafrontier generalized directional distance function is proposed.
• Composite sustainability indicators are developed.
• Chinese state-owned listed enterprises are empirically examined using the proposed model and implications presented based on the results.

Although sustainability recently became a key factor in social science, little progress has been made toward improving the measurement of sustainability performance. This paper proposes composite corporate sustainability performance indicators using a meta-frontier generalized directional distance function. This advanced approach can measure the efficiency of corporate social responsibility activities by benchmarking, while simultaneously considering industrial heterogeneities, using the meta-frontier approach. First, we propose the concept of a meta-frontier generalized directional distance function. Second, several standardized composite indicators related to corporate sustainability performance are developed. The meta-frontier directional distance function is estimated by solving a series of data envelopment analysis models. Chinese state-owned listed enterprises are then empirically examined using the proposed model. We find significant group heterogeneities in terms of corporate sustainability performance. We also derive some policy implications using the empirical results.