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The Value Relevance of Environmental and Social Performance: Evidence from Swedish SIX 300 Companies

  • Semenova, Natalia

    ()

    (Åbo Akademi University)

  • Hassel, Lars

    (Umeå School of Business)

  • Nilsson, Henrik

    (Umeå School of Business)

Registered author(s):

    Environmental, social, and governance information has attracted close attention around the world and is becoming a focus of many companies, investors, financial analysts, and accounting policy makers. This paper provides insight into how environmental and social information is reflected in the market value of listed SIX 300 companies on OMX Stockholm. Applying the residual income valuation model, we express the market value of equity as a function of the book value of equity, accounting earnings, and environmental and social performance, where the last two variables are the proxies for other value-relevant information. We test this model with data from the GES Investment Services® opportunity ratings that enable us to disaggregate the effects of various dimensions of environmental and social performance on market returns. The evidence presented in this study finds support for the value relevance of environmental performance at both aggregated and sub-aggregated levels. In the social dimension, support is found for community and supplier relations. We contribute empirical findings to the current debate on the relations between environmental and social performance and shareholder value, and demonstrate the extra-financial value of environmental and social information.

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    Paper provided by Sustainable Investment Research Platform in its series Sustainable Investment and Corporate Governance Working Papers with number 2009/4.

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    Length: 20 pages
    Date of creation: 28 Aug 2009
    Date of revision:
    Handle: RePEc:hhb:sicgwp:2009_004
    Contact details of provider: Postal: Economics of Corporate Sustainability Management, Department of Industrial Economics and Management, Royal Institute of Technology, SE-100 44 Stockholm, SWEDEN
    Phone: 08-790 78 61
    Fax: 08-790 76 17
    Web page: http://www.sirps.se

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