Impact of Environmental Investments on Corporate Financial Performance: Decomposing Valuation and Cash Flow Effects

Avis Devine () and Erkan Yönder ()
Additional contact information
Avis Devine: York University
Erkan Yönder: Concordia University

The Journal of Real Estate Finance and Economics, 2023, vol. 66, issue 4, No 2, 778-805

Abstract: Abstract Environmentally-sustainable investment can impact firm financial performance through multiple channels. We concentrate on disentangling the related cash flow and valuation impacts. By using an instrumental variable approach, we find that U.S. REITs with a more environmentally-sustainable portfolio attract premiums to their market valuation beyond operating benefits, carry lower systematic risk, and are subject to less uninformed trading (for office and retail portfolios). Such firms also experience both higher asset-level rental revenues and net operating income, and lower interest costs. Importantly, the equity market premium exceeds the property market premium, which is partially explained by reputational effects. Results also confirm valuation findings in office and retail portfolios.

Keywords: Environmental performance; Corporate performance; Valuation; Cash flows; Real estate; Retail (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://link.springer.com/10.1007/s11146-021-09872-y Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:jrefec:v:66:y:2023:i:4:d:10.1007_s11146-021-09872-y

Ordering information: This journal article can be ordered from
http://www.springer. ... ce/journal/11146/PS2

DOI: 10.1007/s11146-021-09872-y

Access Statistics for this article

The Journal of Real Estate Finance and Economics is currently edited by Steven R. Grenadier, James B. Kau and C.F. Sirmans

More articles in The Journal of Real Estate Finance and Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().