nach oben

Journal of Business Ethics

Erschienen in:

01.12.2015

Environmental Sustainability and Implied Cost of Equity: International Evidence

verfasst von: Kartick Gupta

Erschienen in: Journal of Business Ethics | Ausgabe 2/2018

Einloggen

Aktivieren Sie unsere intelligente Suche, um passende Fachinhalte oder Patente zu finden.

search-config

KI-gestützte Suche

Aus

Abstract

In this paper, we examine the relationship between the environmental practices and implied cost of equity. Using a comprehensive sample of 23,301 firm–year observations from 43 countries, we find that an improvement in environmental practices leads to reduction of the implied cost of equity. Further, the results are stronger in countries where country-level governance is weak. Our results indicate that most of the benefits come from the reduction of emission and unnecessary wastage of resources. Our results remain robust to alternative specifications and endogeneity concerns.

Vorheriger Artikel Driving Factors for the Success of the Green Innovation Market: A Relationship System Proposal

Nächster Artikel GHG Reporting and Impression Management: An Assessment of Sustainability Reports from the Energy Sector

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

über 102.000 Bücher
über 537 Zeitschriften

aus folgenden Fachgebieten:

Automobil + Motoren
Bauwesen + Immobilien
Business IT + Informatik
Elektrotechnik + Elektronik
Energie + Nachhaltigkeit
Finance + Banking
Management + Führung
Marketing + Vertrieb
Maschinenbau + Werkstoffe
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

über 67.000 Bücher
über 340 Zeitschriften

aus folgenden Fachgebieten:

Bauwesen + Immobilien
Business IT + Informatik
Finance + Banking
Management + Führung
Marketing + Vertrieb
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Nur mit Berechtigung zugänglich

http://www.unpri.org/news/pri-fact-sheet/, retrieved on 2014.

http://www.equator-principles.com/.

See Li and Mohanram (2014) for details.

http://thomsonreuters.com/en/about-us/corporate-responsibility/esg-performance.html.

The results are also qualitatively similar if we impose a filter of either 5 or 20 percentage.

We thank an anonymous referee for suggesting the tests in Models 10 and 11.

We acknowledge the referee’s suggestion to be more cautious about the endogeneity issues.

Abarbanell, J., & Bushee, B. (1997). Fundamental analysis, future earnings, and stock prices. Journal of Accounting Research, 35, 1–24.CrossRef

Aggarwal, R., Erel, I., Stulz, R., & Williamson, R. (2010). Differences in governance practices between US and foreign firms: Measurement, causes, and consequences. Review of Financial Studies, 23, 3131–3169.CrossRef

Amalric, F. (2006). Pension funds, corporate responsibility and sustainability. Ecological Economics, 59, 440–450.CrossRef

Arellano, M., & Bover, O. (1995). Another look at the instrumental variable estimation of error-components models. Journal of Econometrics, 68, 29–51.CrossRef

Bauer, R., & Hann, D. (2010). Corporate environmental management and credit risk. Maastricht University and European Centre for Corporate Engagement (ECCE).

Blume, M., & Friend, I. (1973). A new look at the capital asset pricing model. Journal of Finance, 28, 19–34.CrossRef

Blundell, R., & Bond, S. (1998). Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics, 87, 115–143.CrossRef

Boubakri, N., Guedhami, O., Mishra, D., & Saffar, W. (2012). Political connections and the cost of equity capital. Journal of Corporate Finance, 18, 541–559.CrossRef

Cai, Y., Jo, H., & Pan, C. (2012). Doing well while doing bad? CSR in controversial industry sectors. Journal of Business Ethics, 108, 467–480.CrossRef

Campbell, J. (1991). A variance decomposition for stock returns. Economic Journal, 101, 157–179.CrossRef

Campbell, J., & Shiller, R. (1988). Stock prices, earnings, and expected dividends. Journal of Finance, 43, 661–676.CrossRef

Carey, J. (2004). Global warming. Business Week Magazine, 16, 60–69.

Chatterji, A., Durand, R., Levine, D., & Touboul, S. (2014). Do ratings of firms converge? Implications for strategy research. IRLE working paper no. 107–114.

Chava, S. (2014). Environmental externalities and cost of capital. Management Science, 60, 1–25.CrossRef

Chava, S., & Purnanandam, A. (2010). Is default risk negatively related to stock returns? Review of Financial Studies, 23, 2523–2559.CrossRef

Chen, K., Chen, Z., & Wei, K. (2009). Legal protection of investors, corporate governance, and the cost of equity capital. Journal of Corporate Finance, 15, 273–289.CrossRef

Chen, K., Chen, Z., & Wei, K. (2011). Agency costs of free cash flow and the effect of shareholder rights on the implied cost of equity capital. Journal of Financial and Quantitative Analysis, 46, 171–207.CrossRef

Chen, M., & Hambrick, D. (1995). Speed, stealth, and selective attack: How small firms differ from large firms in competitive behavior. Academy of Management Journal, 38, 453–482.CrossRef

Cheng, B., Ioannou, I., & Serafeim, G. (2014). Corporate social responsibility and access to finance. Strategic Management Journal, 35, 1–23.CrossRef

Choi, S., & Ng, A. (2011). Environmental and economic dimensions of sustainability and price effects on consumer responses. Journal of Business Ethics, 104, 269–282.CrossRef

Clarkson, P., Li, Y., & Richardson, G. (2004). The market valuation of environmental capital expenditures by pulp and paper companies. Accounting Review, 79, 329–353.CrossRef

Claus, J., & Thomas, J. (2001). Equity premia as low as three percent? Evidence from analysts’ earnings forecasts for domestic and international stock markets. Journal of Finance, 56, 1629–1666.CrossRef

Climent, F., & Soriano, P. (2011). Green and good? The investment performance of US environmental mutual funds. Journal of Business Ethics, 103, 275–287.CrossRef

Cohen, M., Fenn, S., & Konar, S. (1997). Environmental and financial performance: Are they related? Vanderbilt University.

Cormier, D., & Magnan, M. (2007). The revisited contribution of environmental reporting to investors’ valuation of a firm’s earnings: An international perspective. Ecological Economics, 62, 613–626.CrossRef

d’Amboise, G., & Muldowney, M. (1988). Management theory for small business: Attempts and requirements. Academy of Management Review, 13, 226–240.

Dasgupta, S., Laplante, B., & Mamingi, N. (2001). Pollution and capital markets in developing countries. Journal of Environmental Economics and Management, 42, 310–335.CrossRef

David, V. (1995). Trading up: Consumer and environmental regulation in a global economy. Cambridge, MA: Harvard University Press.

Derwall, J., Guenster, N., Bauer, R., & Koedijk, K. (2005). The eco-efficiency premium puzzle. Financial Analysts Journal, 61, 51–63.CrossRef

Dixon-Fowler, H., Slater, D., Johnson, J., Ellstrand, A., & Romi, A. (2013). Beyond “Does it pay to be green?” A meta-analysis of moderators of the CEP–CFP relationship. Journal of Business Ethics, 112, 353–366.CrossRef

Dowell, G., Hart, S., & Yeung, B. (2000). Do corporate global environmental standards create or destroy market value? Management Science, 46, 1059–1074.CrossRef

Easton, P. (2004). PE ratios, PEG ratios, and estimating the implied expected rate of return on equity capital. Accounting Review, 79, 73–95.CrossRef

El Ghoul, S., Guedhami, O., Ni, Y., Pittman, J., & Saadi, S. (2012). Does religion matter to equity pricing? Journal of Business Ethics, 111, 491–518.CrossRef

Elton, E. (1999). Presidential address: Expected return, realized return, and asset pricing tests. Journal of Finance, 54, 1199–1220.CrossRef

Fama, E., & French, K. (1992). The cross-section of expected stock returns. Journal of Finance, 47, 427–465.CrossRef

Fama, E., & French, K. (1993). Common risk factors in the returns on stocks and bonds. Journal of Financial Economics, 33, 3–56.CrossRef

Fama, E., & French, K. (1997). Industry costs of equity. Journal of Financial Economics, 43, 153–193.CrossRef

Fama, E., & MacBeth, J. (1973). Risk, return, and equilibrium: Empirical tests. Journal of Political Economy, 81, 607–636.CrossRef

Fiegenbaum, A., & Karnani, A. (1991). Output flexibility—A competitive advantage for small firms. Strategic Management Journal, 12, 101–114.CrossRef

Fogler R., & Nutt, F. (1975). A note on social responsibility and stock valuation. Academy of Management Journal, 18, 155–160.CrossRef

Francis, J., Olsson, P., & Oswald, D. (2000). Comparing the accuracy and explainability of dividend, free cashflow, and abnormal earnings equity value estimates. Journal of Accounting Research, 38, 45–70.CrossRef

Friedman, M. (1970). The social responsibility of business is to increase its profits. New York Times Magazine, September 13, 225–230.

Garcia-Castro, R., Ariño, M. A., & Canela, M. A. (2010). Does social performance really lead to financial performance? Accounting for endogeneity. Journal of Business Ethics, 92, 107–126.CrossRef

Gebhardt, W., Lee, C., & Swaminathan, B. (2001). Toward an implied cost of capital. Journal of Accounting Research, 39, 135–176.CrossRef

Gilley, K., Worrell, D., Davidson, W., & El-Jelly, A. (2000). Corporate environmental initiatives and anticipated firm performance: The differential effects of process-driven versus product-driven greening initiatives. Journal of Management, 26, 1199–1216.CrossRef

Gode, D., & Mohanram, P. (2003). Inferring the cost of equity using the Ohlson-Juettner model. Review of Accounting Studies, 8, 399–431.

Gray, W., & Shadbegian, R. (1993). Environmental regulation and manufacturing productivity at the plant level. National Bureau of Economic Research working paper #4321, Washington, DC.

Guedhami, O., & Mishra, D. (2009). Excess control, corporate governance and implied cost of equity: International evidence. Financial Review, 44, 489–524.CrossRef

Gupta, S., & Goldar, B. (2005). Do stock markets penalize environment-unfriendly behaviour? Evidence from India. Ecological Economics, 52, 81–95.CrossRef

Hail, L., & Leuz, C. (2006). International differences in the cost of equity capital: Do legal institutions and securities regulation matter? Journal of Accounting Research, 44, 485–531.CrossRef

Hail, L., & Leuz, C. (2009). Cost of capital effects and changes in growth expectations around US cross-listings. Journal of Financial Economics, 93, 428–454.CrossRef

Hart, S. (1995). A natural-resource-based view of the firm. Academy of Management Review, 20, 986–1014.

Hart, S. L., & Ahuja, G. (1996). Does it pay to be green? An empirical examination of the relationship between emission reduction and firm performance. Business Strategy and the Environment, 5, 30–37.CrossRef

Heckman, J. J. (1979). Sample selection bias as a specification error. Econometrica, 47, 153–161.CrossRef

Hettige, H., Huq, M., Pargal, S., & Wheeler, D. (1996). Determinants of pollution abatement in developing countries: Evidence from South and Southeast Asia. World Development, 24, 1891–1904.CrossRef

Hope, O.-K., Kang, T., Thomas, W. B., & Yoo, Y. K. (2009). Impact of excess auditor remuneration on the cost of equity capital around the world. Journal of Accounting, Auditing and Finance, 24, 177–210.CrossRef

Horváthová, E. (2010). Does environmental performance affect financial performance? A meta-analysis. Ecological Economics, 70, 52–59.CrossRef

Hou, K., van Dijk, M., & Zhang, Y. (2012). The implied cost of equity: A new approach. Journal of Accounting and Economics, 53, 504–526.CrossRef

Huang, C.-L., & Kung, F.-H. (2010). Drivers of environmental disclosure and stakeholder expectation: Evidence from Taiwan. Journal of Business Ethics, 96, 435–451.CrossRef

Jaffe, A., Peterson, S., Portney, P., & Stavins, R. (1995). Environmental regulation and the competitiveness of US manufacturing: What does the evidence tell us? Journal of Economic Literature, 33, 132–163.

Karpoff, J., Lott, J., Jr., & Wehrly, E. (2005). The reputational penalties for environmental violations: Empirical evidence. Journal of Law and Economics, 48, 653–675.CrossRef

Kim, Y., Li, H., & Li, S. (2014). Corporate social responsibility and stock price crash risk. Journal of Banking and Finance, 43, 1–13.CrossRef

Klassen, R., & McLaughlin, C. (1996). The impact of environmental management on firm performance. Management Science, 42, 1199–1214.CrossRef

Large, R. O., & Thomsen, C. G. (2011). Drivers of green supply management performance: Evidence from Germany. Journal of Purchasing and Supply Management, 17, 176–184.CrossRef

Lee, C., Ng, D., & Swaminathan, B. (2009). Testing international asset pricing models using implied costs of capital. Journal of Financial and Quantitative Analysis, 44, 307–335.CrossRef

Lesmond, D., Ogden, J., & Trzcinka, C. (1999). A new estimate of transaction costs. Review of Financial Studies, 12, 1113–1141.CrossRef

Li, K., & Mohanram, P. (2014). Evaluating cross-sectional forecasting models for implied cost of capital. Review of Accounting Studies, 19, 1152–1185.CrossRef

Lioui, A., & Sharma, Z. (2012). Environmental corporate social responsibility and financial performance: Disentangling direct and indirect effects. Ecological Economics, 78, 100–111.CrossRef

Lundblad, C. (2007). The risk return tradeoff in the long-run: 1836–2003. Journal of Financial Economics, 85, 123–150.CrossRef

Miles, M. P., & Covin, J. G. (2000). Environmental marketing: A source of reputational, competitive, and financial advantage. Journal of Business Ethics, 23, 299–311.CrossRef

Oberndorfer, U., Schmidt, P., Wagner, M., & Ziegler, A. (2013). Does the stock market value the inclusion in a sustainability stock index? An event study analysis for German firms. Journal of Environmental Economics and Management, 66, 497–509.CrossRef

Ohlson, J., & Juettner-Nauroth, B. (2005). Expected EPS and EPS growth as determinants of value. Review of Accounting Studies, 10, 349–365.CrossRef

Pasquero, J. (1991). Supraorganizational collaboration: The Canadian environmental experiment. Journal of Applied Behavioral Science, 27, 38–64.CrossRef

Pástor, Ľ., Sinha, M., & Swaminathan, B. (2008). Estimating the intertemporal risk–return tradeoff using the implied cost of capital. Journal of Finance, 63, 2859–2897.CrossRef

Petersen, M. (2009). Estimating standard errors in finance panel data sets: Comparing approaches. Review of Financial Studies, 22, 435–480.CrossRef

Porter, M., & Van der Linde, C. (1995). Toward a new conception of the environment–competitiveness relationship. Journal of Economic Perspectives, 9, 97–118.CrossRef

Schaltegger, S., & Synnestvedt, T. (2002). The link between ‘green’ and economic success: Environmental management as the crucial trigger between environmental and economic performance. Journal of Environmental Management, 65, 339–346.

Schreck, P. (2011). Reviewing the business case for corporate social responsibility: New evidence and analysis. Journal of Business Ethics, 103, 167–188.CrossRef

Sharfman, M., & Fernando, C. (2008). Environmental risk management and the cost of capital. Strategic Management Journal, 29, 569–592.CrossRef

Sharma, S., & Vredenburg, H. (1998). Proactive corporate environmental strategy and the development of competitively valuable organizational capabilities. Strategic Management Journal, 19, 729–753.CrossRef

Sharpe, W. (1978). New evidence on the capital asset pricing model: Discussion. Journal of Finance, 33, 917–920.

Tang, Y., Wu, J., & Zhang, L. (2014). Do anomalies exist ex ante? Review of Finance, 18, 843–875.CrossRef

Vuolteenaho, T. (2002). What drives firm-level stock returns? Journal of Finance, 57, 233–264.CrossRef

Wagner, M. (2001). A review of empirical studies concerning the relationship between environmental and economic performance: What does the evidence tell us? Luneburg: Centre of Sustainability Management.

Wagner, M. (2010). The role of corporate sustainability performance for economic performance: A firm-level analysis of moderation effects. Ecological Economics, 69, 1553–1560.CrossRef

Wagner, M., Schaltegger, S., & Wehrmeyer, W. (2001). The relationship between the environmental and economic performance of firms. Greener Management International, 2001, 94–111.CrossRef

Walley, N., & Whitehead, B. (1994). It’s not easy being green. Harvard Business Review, 72, 46–52.

Wheeler, D. (2001). Racing to the bottom? Foreign investment and air pollution in developing countries. Journal of Environment and Development, 10, 225–245.CrossRef

Woo, C., & Cooper, A. (1981). Strategies of effective low share businesses. Strategic Management Journal, 2, 301–318.CrossRef

Yamashita, M., Sen, S., & Roberts, M. (1999). The rewards for environmental conscientiousness in the US capital markets. Journal of Financial and Strategic Decisions, 12, 73–82.

Ytterhus, B., & Sjaker, O. (1998). The GRIP barometeret; a mapping of environmental adaptation in the manufacture of furniture, building and construction, banking and insurance, advertising, tourism and the wholesale and retail trade. Oslo: The Norwegian School of Management and GRIP.

Titel: Environmental Sustainability and Implied Cost of Equity: International Evidence
verfasst von: Kartick Gupta
Publikationsdatum: 01.12.2015
Verlag: Springer Netherlands
Erschienen in: Journal of Business Ethics / Ausgabe 2/2018
Print ISSN: 0167-4544
Elektronische ISSN: 1573-0697
DOI: https://doi.org/10.1007/s10551-015-2971-z

Springer Professional

Abstract

Bitte loggen Sie sich ein, um Zugang zu Ihrer Lizenz zu erhalten.

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft+Technik"

Springer Professional "Wirtschaft"

Weitere Artikel der Ausgabe 2/2018

Business Cases and Corporate Engagement with Sustainability: Differentiating Ethical Motivations

Driving Factors for the Success of the Green Innovation Market: A Relationship System Proposal

Mapping the Relationship Among Political Ideology, CSR Mindset, and CSR Strategy: A Contingency Perspective Applied to Chinese Managers

Internalization of Environmental Practices and Institutional Complexity: Can Stakeholders Pressures Encourage Greenwashing?

Why so Few Women on Boards of Directors? Empirical Evidence from Danish Companies in 1998–2010

Bankers Bashing Back: Amoral CSR Justifications