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Is Corporate Sustainability a Value-Increasing Strategy for Business?

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Author Info

  • Shih-Fang Lo

    (International Division, Chung-Hua Institution for Economic Research, Taiwan)

  • Her-Jiun Sheu

    (Department of Management Science and the Graduate Institute of Finance, National Chiao-Tung University, Taiwan)

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    Abstract

    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. Copyright (c) 2007 The Authors; Journal compilation (c) 2007 Blackwell Publishing Ltd.

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    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1467-8683.2007.00565.x
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    Bibliographic Info

    Article provided by Wiley Blackwell in its journal Corporate Governance: An International Review.

    Volume (Year): 15 (2007)
    Issue (Month): 2 (03)
    Pages: 345-358

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    Handle: RePEc:bla:corgov:v:15:y:2007:i:2:p:345-358

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    Web page: http://www.blackwellpublishing.com/journal.asp?ref=0964-8410&site=1

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    Web: http://www.blackwellpublishing.com/journal.asp?ref=0964-8410&site=1

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    Cited by:
    1. Coral Ingley & Jens Mueller & Graeme Cocks, 2011. "The financial crisis, investor activists and corporate strategy: will this mean shareholders in the boardroom?," Journal of Management and Governance, Springer, vol. 15(4), pages 557-587, November.
    2. Les Coleman, 2011. "Losses from Failure of Stakeholder Sensitive Processes: Financial Consequences for Large US Companies from Breakdowns in Product, Environmental, and Accounting Standards," Journal of Business Ethics, Springer, vol. 98(2), pages 247-258, January.
    3. Adrian Wai Kong Cheung, 2011. "Do Stock Investors Value Corporate Sustainability? Evidence from an Event Study," Journal of Business Ethics, Springer, vol. 99(2), pages 145-165, March.
    4. Isabel Lourenço & Manuel Branco & José Curto & Teresa Eugénio, 2012. "How Does the Market Value Corporate Sustainability Performance?," Journal of Business Ethics, Springer, vol. 108(4), pages 417-428, July.
    5. Isabel Lourenço & Jeffrey Callen & Manuel Branco & José Curto, 2014. "The Value Relevance of Reputation for Sustainability Leadership," Journal of Business Ethics, Springer, vol. 119(1), pages 17-28, January.
    6. Lippert, Inge, 2008. "Perspektivenverschiebungen in der Corporate Governance: Neuere Ansätze und Studien der Corporate-Governance-Forschung," Discussion Papers, Research Unit: Knowledge, Production Systems and Work SP III 2008-302, Social Science Research Center Berlin (WZB).
    7. Clive Boddy & Richard Ladyshewsky & Peter Galvin, 2010. "The Influence of Corporate Psychopaths on Corporate Social Responsibility and Organizational Commitment to Employees," Journal of Business Ethics, Springer, vol. 97(1), pages 1-19, November.
    8. Timo Busch & Volker Hoffmann, 2009. "Ecology-Driven Real Options: An Investment Framework for Incorporating Uncertainties in the Context of the Natural Environment," Journal of Business Ethics, Springer, vol. 90(2), pages 295-310, December.

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