Corporate sustainability and cost of equity capital: do managerial abilities matter?

Abdelmajid Hmaittane*, Kais Bouslah, Bouchra M’Zali, Imane Ibariouen

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

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Abstract

This paper investigates whether a firm’s managerial ability affects the link between a firm’s cost of equity capital and corporate sustainability. We test our predictions by using a large U.S. sample of 17,389 firm-year observations. Our findings show that only when managerial ability is high, corporate sustainability significantly reduces a firm’s implied cost of equity capital. An important implication of our findings is that firms with high managerial abilities and limited sustainability commitment are encouraged to pursue or initiate more sustainability activities owing to their negative effect on a firm’s cost of equity capital.
Original languageEnglish
Article number11363
JournalSustainability
Volume14
Issue number18
DOIs
Publication statusPublished - 10 Sept 2022

Keywords

  • Corporate sustainability
  • Managerial abilities
  • Implied cost of equity capital
  • CSR strengths
  • Financial crisis

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