Firm Complexity and Sustainable Development: Evidence From Textual Analysis

ABSTRACT

This paper investigates the relationship between firm complexity and sustainable development on publicly listed US companies over the period from 2002 to 2021. Utilizing a novel complexity index developed by Loughran and McDonald (2024), we explore whether and how complexity influences sustainable development through two primary channels: the accumulation of intangible assets and information transparency. Empirical results suggest that higher firm complexity significantly improves overall sustainable development, especially in environmental and social dimensions. Mechanism analysis reveals that intangible assets serve as the dominant pathway. Moreover, the effect of complexity on sustainable development is moderated by financial conditions and market competition. These results imply that firm complexity, when well‐managed, may serve as a strategic asset that enhances corporate sustainability performance.