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Is Corporate Sustainability a Value‐Increasing Strategy for Business?

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  • Shih‐Fang Lo
  • Her‐Jiun Sheu

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.

Suggested Citation

  • Shih‐Fang Lo & Her‐Jiun Sheu, 2007. "Is Corporate Sustainability a Value‐Increasing Strategy for Business?," Corporate Governance: An International Review, Wiley Blackwell, vol. 15(2), pages 345-358, March.
    • Handle: RePEc:bla:corgov:v:15:y:2007:i:2:p:345-358
    DOI: 10.1111/j.1467-8683.2007.00565.x
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    1. Kaptein, Muel & Wempe, Johan, 2002. "The Balanced Company: A Theory of Corporate Integrity," OUP Catalogue, Oxford University Press, number 9780199255511.
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