Title: Corporate value changes arising from demonstrated sustainability

Authors: Petr Michlik, Arlyn R. Rubash

Addresses: Product Development and Global Technology, Caterpillar Inc., Peoria, IL, 61629, USA; Foster College of Business and Administration, Bradley University, Peoria, IL, 61625, USA. ' Foster College of Business and Administration, Bradley University, Peoria, IL, 61625, USA

Abstract: The importance of corporation attention to sustainability has grown over recent decades. We examine the magnitude of connections between sustainability and company worth. This paper provides insights and summarises mechanisms explaining how company value may be affected by a management decision to adopt steps recognised as sustainable strategies. We assess measurable effects relative to immediate market reactions to significant corporate communications in the realm of sustainability (namely with respect to being a component of Dow Jones Sustainability Index, DJSI). Longer terms connections between corporate sustainability and corporate value are also discussed. We find no significant short-term effect from disclosure of DJSI participation. We divide the potential benefit of a sustainability focus into five areas: investor relations, customer relationships, proximity to regulator, improvement of internal processes and impact on employees. The data suggest that the advantages of sustainable strategies may be significant but if so, are realised over a period of years and investors do not immediately realise benefits from announcements confirming DJSI membership.

Keywords: Dow Jones Sustainability Index; DJSI; carbon disclosure; large cap companies; corporate values; value changes; sustainable development; sustainable strategies; investor relations; customer relationships; regulators; internal processes; impact on employees; corporate sustainability.

DOI: 10.1504/IJSSM.2011.040777

International Journal of Sustainable Strategic Management, 2011 Vol.3 No.1, pp.13 - 32

Published online: 24 Jun 2011 *

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