Corporate Sustainability: First Evidence on Materiality

The Accounting Review, Vol. 91, No. 6, pp. 1697-1724.

55 Pages Posted: 11 Mar 2015 Last revised: 1 Feb 2017

Date Written: November 9, 2016

Abstract

Using newly-available materiality classifications of sustainability topics, we develop a novel dataset by hand-mapping sustainability investments classified as material for each industry into firm-specific sustainability ratings. This allows us to present new evidence on the value implications of sustainability investments. Using both calendar-time portfolio stock return regressions and firm-level panel regressions we find that firms with good ratings on material sustainability issues significantly outperform firms with poor ratings on these issues. In contrast, firms with good ratings on immaterial sustainability issues do not significantly outperform firms with poor ratings on the same issues. These results are confirmed when we analyze future changes in accounting performance. The results have implications for asset managers who have committed to the integration of sustainability factors in their capital allocation decisions.

Keywords: sustainability, corporate social responsibility, investments, corporate performance

JEL Classification: G12, G14, G2, M1, M2, M4

Suggested Citation

Khan, Mozaffar and Serafeim, George and Yoon, Aaron, Corporate Sustainability: First Evidence on Materiality (November 9, 2016). The Accounting Review, Vol. 91, No. 6, pp. 1697-1724., Available at SSRN: https://ssrn.com/abstract=2575912 or http://dx.doi.org/10.2139/ssrn.2575912

Mozaffar Khan

Causeway Capital Management, LLC

George Serafeim (Contact Author)

Harvard Business School ( email )

Boston, MA 02163
United States

HOME PAGE: http://www.hbs.edu/faculty/Pages/profile.aspx?facId=15705

Aaron Yoon

Northwestern University - Department of Accounting Information & Management ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

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