Journal of Business Ethics

, Volume 108, Issue 4, pp 417–428

How Does the Market Value Corporate Sustainability Performance?

  • Isabel Costa Lourenço
  • Manuel Castelo Branco
  • José Dias Curto
  • Teresa Eugénio
Article

DOI: 10.1007/s10551-011-1102-8

Cite this article as:
Lourenço, I.C., Branco, M.C., Curto, J.D. et al. J Bus Ethics (2012) 108: 417. doi:10.1007/s10551-011-1102-8

Abstract

This study provides empirical evidence on how corporate sustainability performance (CSP), as proxied by membership of the Dow Jones sustainability index, is reflected in the market value of equity. Using a theoretical framework combining institutional perspectives, stakeholder theory, and resource-based perspectives, we develop a set of hypotheses that relate the market value of equity to CSP. For a sample of North American firms, our preliminary results show that CSP has significant explanatory power for stock prices over the traditional summary accounting measures such as earnings and book value of equity. However, further analyses suggest that we should not focus on corporate sustainability itself. Our findings suggest that what investors really do is to penalize large profitable firms with low level of CSP. Firms with incentives to develop a high level of CSP not engaging on such strategy are, thus, penalized by the market.

Keywords

Corporate sustainability Value relevance Canada USA 

Copyright information

© Springer Science+Business Media B.V. 2011

Authors and Affiliations

  • Isabel Costa Lourenço
    • 1
  • Manuel Castelo Branco
    • 2
    • 3
  • José Dias Curto
    • 1
  • Teresa Eugénio
    • 4
  1. 1.UNIDE, Lisbon University Institute (ISCTE-IUL)LisbonPortugal
  2. 2.Faculty of EconomicsUniversity of PortoPortoPortugal
  3. 3.OBEGEF (Observatory in Economics and Management of Fraud)PortoPortugal
  4. 4.School of Technology and ManagementPolytechnic Institute of LeiriaLeiriaPortugal

Personalised recommendations