Sustainability and Measuring its Effect on Firm Value

Abstract

The current interest in sustainable resources by business begs the questions: does sustainability affect the value of the firm, and if so, would it's effect be detectable on the firm value? I propose a model where a possibly polluting input is part of the firm's production function. I find that in a neo-classical model where the firm is a price taker in both the input and output markets, that use of the polluting resource does affect firm value, but whether it would be detectable is dependent upon if the polluting input is taxed.