Eco-Effective Management: An Empirical Link between Firm Value and Corporate Sustainability

Abstract

ABSTRACT Achieving corporate sustainability requires the implementation of management practices that create long-term shareholder value by embracing opportunities and managing risks deriving from economic, environmental, and social developments. Corporations that are sustainable create value that, in the long run, exceeds their environmental impact (Figge and Hahn 2004). We examine the extent to which investors incrementally value the long-run benefits accruing from adoption of eco-effective management. We posit that adoption of eco-effective management results in increases in firms' market valuation, and that those increases persist beyond the current accounting period. Our results support this hypothesis. This study has broad public policy implications as accountants, managers, and government policymakers shift their focus toward sustainability and rely on market-based mechanisms to further environmental goals. Data Availability: All data are available from public sources.