The Value Relevance of SAM's Corporate Sustainability Ranking and GRI Sustainability Reporting in the European Stock Markets
AbstractThis paper investigates whether relative corporate sustainability as measured by the Sustainable Asset Management (SAM) sustainability rating and sustainability reporting in terms of Global Reporting Initiative (GRI) application levels are associated with a higher market valuation. We conduct a value relevance study for the 600 largest European companies with the Feltham and Ohlson (1995) valuation model as a reference point. Our results indicate that for the observation period 2001 to 2011, the association between corporate sustainability and market value is positive. The empirical evidence of a positive relationship between GRI reporting and market value is statistically significant in some but not all of the model specifications. We find no evidence of interaction between the value relevance of corporate sustainability and sustainability reporting, nor do we find any positive effect of external assurance on the capital market perception of GRI application levels. Our results support the notion that conducting business in accordance with ethical norms is also a shareholder value-increasing business strategy. However, it is not possible to verify the information given in sustainability reports through external assurance.
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Bibliographic InfoPaper provided by ZenTra - Center for Transnational Studies in its series ZenTra Working Papers in Transnational Studies with number 19 / 2013.
Length: 32 pages
Date of creation: Oct 2013
Date of revision: Oct 2013
Corporate Sustainability; Global Reporting Initiative (GRI); Sustainability Reporting; International Value Relevance;
Find related papers by JEL classification:
- C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
- D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
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