The World Capital Markets' Perception of Sustainability and the Impact of the Financial Crisis

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

23 Scopus Citations
View graph of relations

Author(s)

Detail(s)

Original languageEnglish
Pages (from-to)475-500
Journal / PublicationJournal of Business Ethics
Volume122
Issue number3
Publication statusPublished - Jun 2014
Externally publishedYes

Abstract

Using a unique dataset provided by the international rating agency GES®, we investigate the effects of corporate sustainability and industry-related exposure to environmental and social risks on the market value of MSCI World firms. The results show a negative relationship in the earlier years of our sample period. However, the analysis reveals that the capital market perception of sustainability has changed owing to the financial crisis. Looking at the height of the crisis in September 2008, the month in which Lehman Brothers shocked the world's capital markets by filing for Chapter 11 bankruptcy protection, we find that the previously negative perception of corporate sustainability across its various dimensions was positively affected and offset. In addition, as a moderated regression analysis shows, the crisis led to a positive perception of corporate sustainability in industries that are exposed to higher environmental and social risks. Our study has the practical implication that executives, in particular in industries with high environmental and social risks, should increase their commitment to corporate sustainability due to the changes in the institutional setting triggered by the financial crisis. © 2013 Springer Science+Business Media Dordrecht.

Research Area(s)

  • Corporate sustainability, Environmental risks, Financial crisis, Global Engagement Services (GES), Instrument variable regression, Moderated regression analysis, Social risks

Bibliographic Note

Publication details (e.g. title, author(s), publication statuses and dates) are captured on an “AS IS” and “AS AVAILABLE” basis at the time of record harvesting from the data source. Suggestions for further amendments or supplementary information can be sent to lbscholars@cityu.edu.hk.