Sustain and Deliver: Capturing the Valuation Effects of Corporate Sustainability

61 Pages Posted: 22 Jun 2018 Last revised: 21 Oct 2019

See all articles by Mohammed Zakriya

Mohammed Zakriya

ESADE Business School, Ramon Llull University

Date Written: May 1, 2018

Abstract

This paper identifies a select few indicators from a large set of environmental, social and governance (ESG) factors; and introduces a corporate sustainability measure. Sustainable part of corporate social performance completely explains its well-documented relation with firm values even after controlling for endogeneity. In parallel, those ESG initiatives that are irrelevant to sustainability have no effect on firm values. Moreover, sustainability-based hedge portfolios could have generated abnormal returns of over 4% per year in the sample period. Together, these results imply that only the sustainable aspects of ESG are associated with superior financial performance in terms of both accounting- and market-based value.

Keywords: Corporate sustainability, ESG, corporate social performance, corporate social responsibility, socially responsible investments, corporate governance

JEL Classification: G32, G34, L21, Q56

Suggested Citation

Zakriya, Mohammed, Sustain and Deliver: Capturing the Valuation Effects of Corporate Sustainability (May 1, 2018). ESADE Business School Research Paper Series; 9th Conference on Financial Markets and Corporate Governance (FMCG) 2018. Available at SSRN: https://ssrn.com/abstract=3053816 or http://dx.doi.org/10.2139/ssrn.3053816

Mohammed Zakriya (Contact Author)

ESADE Business School, Ramon Llull University ( email )

Av. de Pedralbes, 60-62
Barcelona, 08034
Spain

HOME PAGE: http://www.esade.edu/research-webs/eng/gref

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