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Is Corporate Sustainability a Value‐Increasing Strategy for Business?
Author(s) -
Lo ShihFang,
Sheu HerJiun
Publication year - 2007
Publication title -
corporate governance: an international review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.866
H-Index - 85
eISSN - 1467-8683
pISSN - 0964-8410
DOI - 10.1111/j.1467-8683.2007.00565.x
Subject(s) - sustainability , enterprise value , business , corporate sustainability , proxy (statistics) , valuation (finance) , market value , value (mathematics) , valuation effects , sustainable development , corporate social responsibility , accounting , ecology , machine learning , computer science , political science , law , biology
A new movement reconciling corporate sustainability and investment is gaining world‐wide attention. Whether corporate sustainability has an impact on market value is examined using large US non‐financial firms from 1999 to 2002 in this paper. Taking Tobin’s q as the proxy for firm value, a significantly positive relation between corporate sustainability and its market value is found. We also find a strong interaction effect between corporate sustainability and sales growth on firm value. Moreover, there is evidence to support that being sustainable causes a firm to increase its value. This indicates that companies with remarkable sustainable development strategies are more likely to be rewarded by investors with a higher valuation in the financial markets.