Skip to main content
SpringerLink
Log in

The World Capital Markets’ Perception of Sustainability and the Impact of the Financial Crisis

  • Published:
Journal of Business Ethics Aims and scope Submit manuscript

Abstract

Using a unique dataset provided by the international rating agency GES®, we investigate the effects of corporate sustainability and industry-related exposure to environmental and social risks on the market value of MSCI World firms. The results show a negative relationship in the earlier years of our sample period. However, the analysis reveals that the capital market perception of sustainability has changed owing to the financial crisis. Looking at the height of the crisis in September 2008, the month in which Lehman Brothers shocked the world’s capital markets by filing for Chapter 11 bankruptcy protection, we find that the previously negative perception of corporate sustainability across its various dimensions was positively affected and offset. In addition, as a moderated regression analysis shows, the crisis led to a positive perception of corporate sustainability in industries that are exposed to higher environmental and social risks. Our study has the practical implication that executives, in particular in industries with high environmental and social risks, should increase their commitment to corporate sustainability due to the changes in the institutional setting triggered by the financial crisis.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1
Fig. 2
Fig. 3

References

  • Argandoña, A. (2009). Can corporate social responsibility help us understand the credit crisis? Accessed April 08, 2011, from http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1392762

  • Bagaeva, A. (2010). The value relevance of firms’ integral environmental impact: Evidence from Russia. Accessed April 08, 2011, from http://apira2010.econ.usyd.edu.au/conference_proceedings/APIRA-2010-248-Bagaeva-The-value-relevance-of-firms-integral-environmental-impact.pdf

  • Baron, D. P. (2001). Private politics, corporate social responsibility, and integrated strategy. Journal of Economics & Management Strategy, 10(1), 7–45.

    Article  Google Scholar 

  • Barth, M. E., Beaver, W. H., & Landsman, W. R. (2001). The relevance of the value relevance literature for financial accounting standard setting: Another view. Journal of Accounting and Economics, 31(1–3), 77–104.

    Article  Google Scholar 

  • Barth, M. E., & Clinch, G. (2009). Scale effects in capital markets-based accounting research. Journal of Business Finance & Accounting, 36(3), 253–288.

    Article  Google Scholar 

  • Barth, M. E., & Kallapur, S. (1996). The effects of cross-sectional scale differences on regression results in empirical accounting research. Contemporary Accounting Research, 13(2), 527–567.

    Article  Google Scholar 

  • Bartkoski, N. N., Sharfman, M. P., & Fernando, C. S. (2010). Environmental risk management and cost of capital: An international perspective. In Academy of Management Annual Meeting Proceedings (pp. 1–6).

  • Basu, S. (1997). The conservatism principle and the asymmetric timeliness of earnings. Journal of Accounting and Economics, 24(1), 3–37.

    Article  Google Scholar 

  • Bird, R., Hall, A. D., Momentè, F., & Reggiani, F. (2007). What corporate social responsibility activities are valued by the market?. Journal of Business Ethics, 76(2), 189–206.

    Article  Google Scholar 

  • Brambor, T., Clark, W. R., & Golder, M. (2006). Understanding interaction models: Improving empirical analyses. Political Analysis, 14(1), 63–82.

    Article  Google Scholar 

  • Brammer, S. J., Brooks, C., & Pavelin, S. (2006). Corporate social performance and stock returns: UK evidence from disaggregate measures. Financial Management, 35(3), 97–116.

    Article  Google Scholar 

  • Brammer, S. J., Jackson, G., & Matten, D. (2012). Corporate social responsibility and institutional theory: New perspectives on private governance. Socio-Economic Review, 10(1), 3–28.

    Article  Google Scholar 

  • Campbell, J. L. (2007). Why would corporations behave in socially responsible ways? An institutional theory of corporate social responsibility. Academy of Management Review, 32(3), 946–967.

    Article  Google Scholar 

  • Chiu, S.-C., & Sharfman, M. (2011). Legitimacy, visibility, and the antecedents of corporate social performance: An investigation of the instrumental perspective. Journal of Management, 37(6), 1558–1585.

    Article  Google Scholar 

  • Collins, D. W., Maydew, E. L., & Weiss, I. S. (1997). Changes in the value-relevance of earnings and book values over the last forty years. Journal of Accounting and Economics, 24(1), 39–67.

    Article  Google Scholar 

  • Dawson, J. F., & Richter, A. W. (2006). Probing three-way interactions in moderated multiple regression development and application of a slope difference test. Journal of Applied Psychology, 91(4), 917–926.

    Article  Google Scholar 

  • Derwall, J., Koedijk, K., & ter Horst, J. R. (2011). A tale of values-driven and profit-seeking social investors. Journal of Banking & Finance, 35(8), 2137–2147.

    Article  Google Scholar 

  • Dhaliwal, D. S., Li, O. Z., Tsang, A., & Yang, G. Y. (2011). Voluntary nonfinancial disclosure and the cost of equity capital: The initiation of corporate social responsibility reporting. Accounting Review, 86(1), 59–100.

    Article  Google Scholar 

  • El Ghoul, S., Guedhami, O., Kwok, C. C. Y., & Mishra, D. R. (2011). Does corporate social responsibility affect the cost of capital?. Journal of Banking & Finance, 35(9), 2388–2406.

    Article  Google Scholar 

  • Emeseh, E., Ako, R., Okonmah, P., & Obokoh, L. O. (2010). Corporations, CSR and self regulation: What lessons from the global financial crisis? German Law Journal, 11(2), 230–259.

    Google Scholar 

  • Fernández-Feijóo Souto, B., 2009. Crisis and corporate social responsibility: Threat or opportunity? International Journal of Economic Sciences and Applied Research, 2(1), 36–50.

  • Foerster, S. R., & Sapp, S. G. (2005). Valuation of financial versus non-financial firms: A global perspective. Journal of International Financial Markets, Institutions & Money, 15(1), 1–20.

    Article  Google Scholar 

  • Gerzema, J., & D’Antonio, M. (2011). Spend shift: How the post-crisis values revolution is changing the way we buy, sell, and live (1st ed.). San Francisco: Jossey-Bass.

    Google Scholar 

  • Gilg, A., Barr, S., & Ford, N. (2005). Green consumption or sustainable lifestyles? Identifying the sustainable consumer. Futures, 37(6), 481–504.

    Article  Google Scholar 

  • Godfrey, P. C. (2005). The relationship between corporate philanthropy and shareholder wealth: A risk management perspective. Academy of Management Review, 30(4), 777–798.

    Article  Google Scholar 

  • Goss, A., & Roberts, G. S. (2011). The impact of corporate social responsibility on the cost of bank loans. Journal of Banking & Finance, 35(7), 1794–1810.

    Article  Google Scholar 

  • Griffin, J. J., & Mahon, J. F. (1997). The corporate social performance and corporate financial performance debate: Twenty-five years of incomparable research. Business & Society, 36(1), 5–31.

    Article  Google Scholar 

  • Guenster, N., Bauer, R., Derwall, J., & Koedijk, K. (2011). The economic value of corporate eco-efficiency. European Financial Management, 17(4), 679–704.

    Article  Google Scholar 

  • Hansen, L. P. (1982). Large sample properties of generalized method of moments estimators. Econometrica, 50(4), 1029–1054.

    Article  Google Scholar 

  • Hart, S. L. (1995). A natural-resource-based view of the firm. Academy of Management Review, 20(4), 986–1014.

    Google Scholar 

  • Hart, S. L., & Dowell, G. (2011). A natural-resource-based view of the firm fifteen years after. Journal of Management, 37(5), 1464–1479.

    Article  Google Scholar 

  • Hassel, L. G., Nilsson, H., & Nyquist, S. (2005). The value relevance of environmental performance. European Accounting Review, 14(1), 41–61.

    Article  Google Scholar 

  • Hayn, C. (1995). The information content of losses. Journal of Accounting and Economics, 20(2), 125–153.

    Article  Google Scholar 

  • Heinkel, R., Kraus, A., & Zechner, J. (2001). The effect of green investment on corporate behavior. Journal of Financial & Quantitative Analysis, 36(4), 431–449.

    Article  Google Scholar 

  • Hirschey, M., Richardson, V. J., & Scholz, S. (2001). Value relevance of nonfinancial information: The case of patent data. Review of Quantitative Finance and Accounting, 17(3), 223–235.

    Article  Google Scholar 

  • Hughes, K. E. (2000). The value relevance of nonfinancial measures of air pollution in the electric utility industry. Accounting Review, 75(2), 209–228.

    Article  Google Scholar 

  • Hybels, R. C. (1995). On legitimacy, legitimation, and organizations: A critical review and integrative theoretical model. In Academy of Management Best Papers Proceedings (pp. 241–245).

  • Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305–360.

    Article  Google Scholar 

  • Karaibrahimoglu, Y. Z. (2010). Corporate social responsibility in times of financial crisis. African Journal of Business Management, 4(4), 382–389.

    Google Scholar 

  • Kemper, A., & Martin, R. L. (2010). After the fall: The global financial crisis as a test of corporate social responsibility theories. European Management Review, 7(4), 229–239.

    Article  Google Scholar 

  • Klassen, R. D., & McLaughlin, C. P. (1993). TQM and environmental excellence in manufacturing. Industrial Management & Data Systems, 93(6), 14–22.

    Article  Google Scholar 

  • Klassen, R. D., & McLaughlin, C. P. (1996). The impact of environmental management on firm performance. Management Science, 42(8), 1199–1214.

    Article  Google Scholar 

  • Kleibergen, F., & Paap, R. (2006). Generalized reduced rank tests using the singular value decomposition. Journal of Econometrics, 133(1), 97–126.

    Article  Google Scholar 

  • Kotler, P. (2011). Reinventing marketing to manage the environmental imperative. Journal of Marketing, 75(4), 132–135.

    Article  Google Scholar 

  • Larcker, D. F., & Rusticus, T. O. (2010). On the use of instrumental variables in accounting research. Journal of Accounting & Economics, 49(3), 186–205.

    Article  Google Scholar 

  • Lawrence, A. T. (2010). Managing disputes with nonmarket stakeholders wage a fight, withdraw, wait, or work it out? California Management Review, 53(1), 90–113.

    Article  Google Scholar 

  • Lo, S.-F., & Sheu, H.-J. (2007). Is corporate sustainability a value increasing strategy for business? Corporate Governance: An International Review, 15(2), 345–358.

    Article  Google Scholar 

  • Luchs, M. G., Naylor, R. W., Irwin, J. R., & Raghunathan, R. (2010). The sustainability liability: Potential negative effects of ethicality on product preference. Journal of Marketing, 74(5), 18–31.

    Article  Google Scholar 

  • Lundgren, T. (2011). A microeconomic model of corporate social responsibility. Metroeconomica, 62(1), 69–95.

    Article  Google Scholar 

  • Manubens, M. (2009). Corporate social responsibility in an economic crisis: An opportunity for renewal. Global Business & Organizational Excellence, 29(1), 50–60.

    Article  Google Scholar 

  • Martin, R. L. (2002). The virtue matrix: Calculating the return on corporate responsibility. Harvard Business Review, 80(3), 68–75.

    Google Scholar 

  • McWilliams, A., & Siegel, D. S. (2001). Corporate social responsibility: A theory of the firm perspective. Academy of Management Review, 26(1), 117–127.

    Google Scholar 

  • McWilliams, A., & Siegel, D. S. (2011). Creating and capturing value: Strategic corporate social responsibility, resource-based theory, and sustainable competitive advantage. Journal of Management, 37(5), 1480–1495.

    Article  Google Scholar 

  • Ohlson, J. A. (1995). Earnings, book values and dividends in equity valuation. Contemporary Accounting Research, 11(2), 661–686.

    Article  Google Scholar 

  • Rajgopal, S., Venkatachalam, M., & Kotha, S. (2003). The value relevance of network advantages: The case of e-commerce firms. Journal of Accounting Research, 41(1), 135–162.

    Article  Google Scholar 

  • Sandhu, S. (2010). Shifting paradigms in corporate environmentalism: From poachers to gamekeepers. Business & Society Review, 115(3), 285–310.

    Article  Google Scholar 

  • Semenova, N. (2011). Asymmetry in value relevance of environmental performance: Role of industry and size. Accessed April 09, 2011, from http://www.sirp.se/getfile.ashx?cid=280784&cc.

  • Semenova, N., & Hassel, L. G. (2008). Financial outcomes of environmental risk and opportunity for US companies. Sustainable Development, 16(3), 195–212.

    Article  Google Scholar 

  • Semenova, N., Hassel, L. G., & Nilsson, H. (2009). The value relevance of environmental and social performance: Evidence from Swedish SIX 300 companies. Accessed December 08, 2010, from http://www.pwc.com/sv_SE/se/hallbar-utveckling/assets/sammanfattning_six300.pdf.

  • Sharfman, M. P., & Fernando, C. S. (2008). Environmental risk management and the cost of capital. Strategic Management Journal, 29(6), 569–592.

    Article  Google Scholar 

  • Suchman, M. C. (1995). Managing legitimacy strategic and institutional approaches. Academy of Management Review, 20(3), 571–610.

    Google Scholar 

  • Tanner, C., & Wolfing Kast, S. (2003). Promoting sustainable consumption: Determinants of green purchases by Swiss consumers. Psychology & Marketing, 20(10), 883–902.

    Article  Google Scholar 

  • Trudel, R., & Cotte, J. (2009). Does it pay to be good? MIT Sloan Management Review, 50(2), 61–68.

    Google Scholar 

  • Waddock, S. A., & Graves, S. B. (1997). The corporate social performance–financial performance link. Strategic Management Journal, 18(4), 303–319.

    Article  Google Scholar 

  • Wall Street Journal. (October 17, 2011). Spreading protests yet to jell: Occupy Wall Street movement goes global but still hasn’t forged common goal. Accessed January 06, 2012, from http://online.wsj.com/article/SB100014240529702044795045766350505422416050.html.

  • Wooldridge, J. M. (2010). Econometric analysis of cross section and panel data (2nd ed.). Cambridge, MA: MIT.

    Google Scholar 

Download references

Acknowledgements

We gratefully acknowledge that GES provided the data free of charge and assisted us in understanding their methodology whenever such assistance was necessary.

Author information

Authors and Affiliations

  1. Accounting and Corporate Governance, University of Oldenburg, Ammerländer Heerstr. 114–118, 26111, Oldenburg, Germany

    Kerstin Lopatta & Thomas Kaspereit

Authors
  1. Kerstin Lopatta
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Thomas Kaspereit
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Thomas Kaspereit.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Lopatta, K., Kaspereit, T. The World Capital Markets’ Perception of Sustainability and the Impact of the Financial Crisis. J Bus Ethics 122, 475–500 (2014). https://doi.org/10.1007/s10551-013-1760-9

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10551-013-1760-9

Keywords

Search

Navigation