How Does the Market Value Corporate Sustainability Performance?

• Type: Article in International Scientific Journal
• Date: 2012

Authors

Isabel Costa Lourenço (Author) Other; Manuel Castelo Branco (Author) FEP; José Dias Curto (Author) Other; Teresa Eugénio (Author) Other

Journal

Title: Journal of Business Ethics

Vol. 108 No. 4

Pages: 417-428

ISSN: 0167-4544

Publisher: Springer Nature

Indexing

ISI Web of Knowledge - 186 Citations

ISI Web of Science

Scopus - 223 Citations

Scientific classification

FOS: Social sciences > Economics and Business

Other information

Authenticus ID: P-002-8KQ

DOI: 10.1007/s10551-011-1102-8

Abstract (EN): This study provides empirical evidence on how corporate sustainability performance (CSP), as proxied by membership of the Dow Jones sustainability index, is reflected in the market value of equity. Using a theoretical framework combining institutional perspectives, stakeholder theory, and resource-based perspectives, we develop a set of hypotheses that relate the market value of equity to CSP. For a sample of North American firms, our preliminary results show that CSP has significant explanatory power for stock prices over the traditional summary accounting measures such as earnings and book value of equity. However, further analyses suggest that we should not focus on corporate sustainability itself. Our findings suggest that what investors really do is to penalize large profitable firms with low level of CSP. Firms with incentives to develop a high level of CSP not engaging on such strategy are, thus, penalized by the market.

Language: English

Type (Professor's evaluation): Scientific

No. of pages: 12