Essays on the Interrelation between Corporate Finance and Corporate Sustainability

Sustainability is a paradigm permeating all aspects of business, including financial performance. Startups as innovation drivers are of particular interest in this context. However, our knowledge of how sustainability and performance are connected is limited for startups compared to large corporations. This doctoral dissertation addresses related research gaps with three empirical studies at the intersection of corporate finance and corporate sustainability. The first study examines the relationship between startup sustainability signaling and financing success. The results provide the first large-scale empirical evidence for a U-shaped connection between startup sustainability and funding success: those that signal the most and the least raise the most venture capital. Sustainability signaling is, therefore, not exclusively positive or negative for startups but rather part of their strategic differentiation. The second study explores how investors and startups select each other based on sustainability preferences, how investors influence the sustainability efforts of their startup investments, and the consequences for startup valuation. It provides empirical evidence that startups and investors prefer partners with a similar view on sustainability. As a result, investors are willing to pay a premium for an investment in a similar-minded firm. Moreover, it shows that startup sustainability communication increases after a green investor joins as an investor, while there is no change after a brown investor does so. Overall, the study contributes to a more nuanced understanding of treatment and selection mechanisms between investors and startups. The last study delves into how the maturity of a startup’s business model influences the founding team’s exit options. It identifies that startups pioneering a new business model are the least likely to perform an initial public offering. However, they are also the most likely to exit via an acquisition. This study contributes to a more nuanced understanding of how firstmoving and business models affect founder’s exit prospects.