The Value Relevance of Environmental and Social Performance: Evidence from Swedish SIX 300 Companies

Natalia Semenova (), Lars Hassel and Henrik Nilsson
Additional contact information
Natalia Semenova: Åbo Akademi University, Postal: Domkyrkotorget 3, FI-20500 ÅBO, Finland, http://www.abo.fi
Lars Hassel: Umeå School of Business
Henrik Nilsson: Umeå School of Business

No 2009/4, Sustainable Investment and Corporate Governance Working Papers from Sustainable Investment Research Platform

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 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2009-08-28
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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