Corporate sustainability and value

Abstract

Purpose

This study aims to explore the influence of corporate sustainability on organizational value, specifically focusing on companies ranked in the Just Capital Market ranking. The aim is to establish whether higher sustainability rankings are associated with increased firm value and to investigate how corporate social responsibility (CSR) activities affect both financial and non-financial outcomes.

Design/methodology/approach

This study uses the Ohlson model to assess the value-generation potential of the top and bottom ten companies in the Just Capital Market ranking from 2013 to 2018. The analysis involves evaluating stock prices and other financial metrics and incorporating non-financial indicators related to CSR activities to gain a comprehensive understanding of their impact on firm valuation.

Findings

The results indicate a strong connection between high sustainability rankings and increased market value. Companies such as Microsoft, Intel and Alphabet, which have robust CSR initiatives, have shown significant improvements in market performance due to greater stakeholder engagement and detailed non-financial disclosures. On the other hand, companies with low sustainability ratings have demonstrated weaker market performance, which indicates the financial risks associated with neglecting CSR activities. This study underscores the critical importance of integrating CSR into fundamental business strategies to create sustainable value.

Originality/value

This study addresses the limitations of traditional financial indicators by incorporating non-financial factors into the valuation process. The study offers a more comprehensive assessment of firm value, reflecting modern business practices and the evolving global economy landscape. Integrating nonfinancial indicators enhances valuation accuracy and provides a holistic view of company performance, enabling stakeholders to make informed decisions based on a broader range of factors. This innovative method may reshape firm valuations, leading to more accurate and reliable assessments in contemporary business contexts.

Citation

Ahmad, H.I. and Aljifri, K. (2024), "Corporate sustainability and value", Journal of Asia Business Studies, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JABS-05-2024-0281