RT info:eu-repo/semantics/article
T1 The value of a firm’s engagement in ESG practices: Are we looking at the right side?
A1 Fuente Herrero, Gabriel de la
A1 Ortiz Almeyda, Margarita
A1 Velasco González, María Del Pilar
K1 Corporate sustainability
K1 Sostenibilidad corporativa
K1 Corporate social responsibility
K1 Responsabilidad social corporativa
K1 Firm value
K1 Valor de empresa
AB Firms allocate many resources to environmental, social, and governance (ESG) issues and to growth options as if they were independent sources of value. Challenging this view, this paper explores the interplay of a firm's engagement in ESG practices and growth options in determining its total value. We draw upon real options reasoning to explain how ESG practices can carry two opposite (trust-enhancing and risk-reducing) forces, driving an inverted U-form relationship between ESG performance and growth options value. Moreover, we argue that ESG performance and growth options are likely to build substitutive insurance mechanisms which might exert a negative moderating effect of growth options on the relationship between ESG performance and a firm's total value. Empirical analyses of ESG scores and growth options values on a panel of U.S. firms from 2009 to 2018 provide substantial support for our hypotheses. Our results show that the inverted U-form relationship between ESG performance and growth options value becomes stronger for the environmental and social pillars. Our evidence on the moderating effect of growth option values also provides valuable insights for interpreting prior conflicting empirical evidence on the association between ESG performance and a firm's total value.
PB Elsevier
SN 0024-6301
YR 2021
FD 2021
LK https://uvadoc.uva.es/handle/10324/48681
UL https://uvadoc.uva.es/handle/10324/48681
LA eng
NO Long Range Planning, 2021, In Press, 102143
NO Producción Científica
DS UVaDOC
RD 27-abr-2024