Sustainability and Firm Valuation: An International Investigation

• In Event: Financial Accounting and Reporting 5

Abstract

We document a positive association between firms’ sustainability engagement and firm valuation using an international sample from 1999 to 2011. Consistent with the value enhancing theory, this evidence suggests that firms acting in a sustainable way are more valuable in the capital market. We use Dow Jones Sustainability Index as a measure of firms’ sustainability performance. Furthermore, we predict and find that the positive valuation effect of sustainability is concentrated in countries with strong investor protection and high level of disclosures. This finding suggests that shareholders view firms’ sustainability favorably when the legal environment effectively protects minority shareholders’ rights and limits managerial expropriation. Our paper adds to the current literature of assessing the economic value of corporate sustainability engagement.

Authors

• Minna Yu, Monmouth University

• Ronald Zhao, Monmouth University