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Corporate Sustainability and Cost of Equity Capital: Do Managerial Abilities Matter?

Author

Listed:
  • Abdelmajid Hmaittane

    (National School of Trade & Management (ENCG), Ibn Zohr University, Agadir 80000, Morocco
    African Chair of Innovation and Sustainable Management (CAIMD-UM6P), Mohammed VI Polytechnic University, Ben Guerir 43150, Morocco)

  • Kais Bouslah

    (African Chair of Innovation and Sustainable Management (CAIMD-UM6P), Mohammed VI Polytechnic University, Ben Guerir 43150, Morocco
    Centre for Responsible Banking and Finance, School of Management, University of St Andrews, North Haugh, St Andrews KY16 9RJ, UK)

  • Bouchra M’Zali

    (African Chair of Innovation and Sustainable Management (CAIMD-UM6P), Mohammed VI Polytechnic University, Ben Guerir 43150, Morocco
    School of Management, Université du Québec à Montréal, Montreal, QC H3C 3P8, Canada)

  • Imane Ibariouen

    (National School of Trade & Management (ENCG), Ibn Zohr University, Agadir 80000, Morocco)

Abstract

This paper investigates whether a firm’s managerial ability affects the link between a firm’s cost of equity capital and corporate sustainability. We test our predictions by using a large U.S. sample of 17,389 firm-year observations. Our findings show that only when managerial ability is high, corporate sustainability significantly reduces a firm’s implied cost of equity capital. An important implication of our findings is that firms with high managerial abilities and limited sustainability commitment are encouraged to pursue or initiate more sustainability activities owing to their negative effect on a firm’s cost of equity capital.

Suggested Citation

  • Abdelmajid Hmaittane & Kais Bouslah & Bouchra M’Zali & Imane Ibariouen, 2022. "Corporate Sustainability and Cost of Equity Capital: Do Managerial Abilities Matter?," Sustainability, MDPI, vol. 14(18), pages 1-17, September.
    • Handle: RePEc:gam:jsusta:v:14:y:2022:i:18:p:11363-:d:911688
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    References listed on IDEAS

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    1. Khadija S. Almaghrabi, 2023. "Climate Change Exposure and Firm Performance: Does Managerial Ability Matter?," Sustainability, MDPI, vol. 15(17), pages 1-16, August.

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