The price of unsustainability: An experiment with professional private equity investors

Patricia Crifo, Vanina Forget and Sabrina Teyssier
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Vanina Forget: X-DEP-ECO - Département d'Économie de l'École Polytechnique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris, AgroParisTech

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Abstract: This paper sheds light on the impact sustainable and unsustainable corporate practices have on equity financing. We present a unique framed field experiment in which professional private equity investors competed in closed auctions to acquire fictive firms. We hence observe that corporate non-financial performance impacts firm valuation and investment decision and we quantify to which extent. Main result is an asymmetric effect, entrepreneurs having more to lose from unsustainable practices than to gain from sustainable ones. Our findings are discussed in terms of practical implications for both investors and firm managers.

Keywords: Private Equity.; Corporate Sustainability; Equity Financing; Field Experiment; Firm Valuation; Private Equity (search for similar items in EconPapers)
Date: 2012-11-26
Note: View the original document on HAL open archive server: https://hal.science/hal-00757203v1
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