Corporate sustainability and shareholder wealth

Justyna Przychodzeń · Wojciech Przychodzeń

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Corporate Social Responsibility Reporting Environmental Sustainability in Business Sustainable Finance and Green Bonds

Abstract

The goal of this study is to provide insights in relation to implementing sustainability into corporate strategy, and provide an answer about whether it can lead to higher than average market valuation. Using extensive data of Standard & Poor's (S&P) 500 companies covering the years 2006–10, 85 companies were selected as meeting corporate sustainability criteria. An investment strategy that bought companies with corporate sustainability would have earned abnormal returns of 7.4% per year during the sample period. We find that companies with balanced financial, social and environmental activities had lower revenues growth, lower growth volatility and lower stock price volatility. These results are consistent with the idea that companies benefit from investing in corporate sustainability and that these practices are reflected in their stock prices. The results also indicate that investment in sustainable companies does not show anti-cyclical patterns within the usual stock market cycle, but it is connected with higher stock market crash resistance. The empirical evidence from this paper is particularly pronounced for public companies that consider implementing sustainability into their core business strategy. It also contributes to better understanding of this concept in the contemporary capital markets.

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References

1993Common risk factors in the returns on stocks and bonds 2010Strategic management a stakeholder approach 1997On Persistence in Mutual Fund Performance 2007The Social Responsibility of Business Is to Increase Its Profits 1995The Stakeholder Theory of the Corporation: Concepts, Evidence, and Implications 1995A Stakeholder Framework for Analyzing and Evaluating Corporate Social Performance 2003Corporate Social and Financial Performance: A Meta-Analysis 2007Strategy and society: the link between competitive advantage and corporate social responsibility

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