Valuation of ESG factors: the moderating effect of cash holdings

Author
Perez-de-Toledo, Eloisa
Bocatto, Evandro
Faculty Advisor
Date
2019
Keywords
Environmental, Social and Governance (ESG) practises
Abstract (summary)
In this paper, we examine the value effects of investments in ESG practices by focusing on the valuation of a specific asset class, namely cash holdings. The main idea is that shareholders would value one dollar of cash at a premium when this dollar is invested in companies that follow a more stringent ESG strategy than in companies that do not. We argue that ESG initiatives can be value-enhancing investments if they enable companies to acquire resources that are valuable, unique, and inimitable (Barney 1991), and if they receive the support of key stakeholders (Freeman 1984). Therefore, by internalizing these resources companies create a sustainable competitive advantage that ultimately increases firm value.
Publication Information
DOI
Notes
Presented on August 29-30 at the International Workshop on Financial System Architecture & Stability (IWFSAS) held at the University of Victoria in Victoria, British Columbia.
Item Type
Presentation
Language
English
Rights
All Rights Reserved