The value relevance of environmental and social performance : evidence from Swedish SIX 300 companies

• Environmental, social, and governance performance 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 performance is reflected in the market value of listed SIX 300 companies on OMX Stockholm. Applying the Ohlson 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 valuerelevant information. We test this model with data from the GES Investment Services® risk ratings that enable us to create a holistic view on the long-term extra-financial performance and to disaggregate the effects of various dimensions of environmental and social performance on stock prices. 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 performance.

Subject headings

SAMHÄLLSVETENSKAP  -- Ekonomi och näringsliv (hsv//swe)

SOCIAL SCIENCES  -- Economics and Business (hsv//eng)

SAMHÄLLSVETENSKAP  -- Ekonomi och näringsliv -- Nationalekonomi (hsv//swe)

SOCIAL SCIENCES  -- Economics and Business -- Economics (hsv//eng)

Keyword

Environmental performance

social performance

equity valuation

financial accounting

företagsekonomi

Business Studies

Economics

Publication and Content Type

ref (subject category)

art (subject category)