Sustainable Investment and Corporate Governance Working Papers, Sustainable Investment Research Platform
No 2009/4:
The Value Relevance of Environmental and Social Performance: Evidence from Swedish SIX 300 Companies
Natalia Semenova ()
, Lars Hassel and Henrik Nilsson
Abstract:
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.
Keywords: Environmental and Social Performance; Equity Valuation; Financial Accounting; Non-Financial Information; (follow links to similar papers)
20 pages, August 28, 2009
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