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The price of unsustainability: An experiment with professional private equity investors

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  • Patricia Crifo

    (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X, UP10 - Université Paris 10, Paris Ouest Nanterre La Défense - Université Paris X - Paris Ouest Nanterre La Défense - Ministère de l'Enseignement Supérieur et de la Recherche Scientifique, CIRANO - Centre interuniversitaire de recherche en analyse des organisations - Université du Québec à Montréal)

  • Vanina Forget

    (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X, AgroParisTech - AgroParisTech)

  • Sabrina Teyssier

    (ALISS - Alimentation et sciences sociales - INRA : UR1303)

Abstract

This paper sheds light on the impact sustainable and unsustainable corporate practices have on equity financing. We present a unique framed field experiment in which professional private equity investors competed in closed auctions to acquire fictive firms. We hence observe that corporate non-financial performance impacts firm valuation and investment decision and we quantify to which extent. Main result is an asymmetric effect, entrepreneurs having more to lose from unsustainable practices than to gain from sustainable ones. Our findings are discussed in terms of practical implications for both investors and firm managers.

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Bibliographic Info

Paper provided by HAL in its series Working Papers with number hal-00757203.

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Date of creation: 26 Nov 2012
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Handle: RePEc:hal:wpaper:hal-00757203

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Related research

Keywords: Corporate Sustainability; Equity Financing; Field Experiment; Firm Valuation; Private Equity.;

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