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Journal of Business Ethics
Published in: Journal of Business Ethics 1/2014

01-01-2014

The Value Relevance of Reputation for Sustainability Leadership

Authors: Isabel Costa Lourenço, Jeffrey Lawrence Callen, Manuel Castelo Branco, José Dias Curto

Published in: Journal of Business Ethics | Issue 1/2014

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Abstract

This study investigates whether the market valuation of the two summary accounting measures, book value of equity and net income, is higher for firms with reputation for sustainability leadership, when compared to firms that do not enjoy such reputation. The results are interpreted through the lens of a framework combining signalling theory and resource-based theory, according to which firms signal their commitment to sustainability to influence the external perception of reputation. A firm’s reputation for being committed to sustainability is an intangible resource that can increase the value of a firm’s expected cash flows and/or reduce the variability of its cash flows. Our findings are according to expectations and show that the net income of firms with good sustainability reputation has a higher valuation by the market, when compared to their counterparts.
previous article Sustainable Bonuses: Sign of Corporate Responsibility or Window Dressing?
next article Modeling Ethical Business Culture: Development of the Ethical Business Culture Survey and Its Use to Validate the CEBC Model of Ethical Business Culture

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Footnotes
1
The DJSI Guidebook is available at http://​www.​sustainability-index.​com.
 
2
We use the market value of equity as of fiscal year-end. However, untabulated findings reveal that our inferences are not sensitive to using prices as of fiscal year-end or as of 3 months after fiscal year-end.
 
3
As a rule of thumb, correlation between explanatory variables in excess of 0.8 suggests that multicollinearity is a serious problem (Gujarati 1995).
 
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Metadata
Title
The Value Relevance of Reputation for Sustainability Leadership
Authors
Isabel Costa Lourenço
Jeffrey Lawrence Callen
Manuel Castelo Branco
José Dias Curto
Publication date
01-01-2014
Publisher
Springer Netherlands
Published in
Journal of Business Ethics / Issue 1/2014
Print ISSN: 0167-4544
Electronic ISSN: 1573-0697
DOI
https://doi.org/10.1007/s10551-012-1617-7

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