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

Abdelmajid Hmaittane; Kais Bouslah; Bouchra M’Zali; Imane Ibariouen

doi:10.3390/su141811363

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

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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 language	English
Article number	11363
Journal	Sustainability
Volume	14
Issue number	18
DOIs	https://doi.org/10.3390/su141811363
Publication status	Published - 10 Sept 2022

Keywords

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

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

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10.3390/su141811363Licence: CC BY

Hmaittane_2022_Sustainability_Corporate_CC
Copyright: © 2022 by the authors. Licensee MDPI, Basel, Switzerland. This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
Final published version, 475 KBLicence: CC BY

https://www.mdpi.com/2071-1050/14/18/11363Licence: CC BY

Cite this

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title = "Corporate sustainability and cost of equity capital: do managerial abilities matter?",

abstract = "This paper investigates whether a firm{\textquoteright}s managerial ability affects the link between a firm{\textquoteright}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{\textquoteright}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{\textquoteright}s cost of equity capital. ",

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AU - Hmaittane, Abdelmajid

AU - Bouslah, Kais

AU - M’Zali, Bouchra

AU - Ibariouen, Imane

PY - 2022/9/10

Y1 - 2022/9/10

N2 - 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.

AB - 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.

KW - Corporate sustainability

KW - Managerial abilities

KW - Implied cost of equity capital

KW - CSR strengths

KW - Financial crisis

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DO - 10.3390/su141811363

M3 - Article

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JO - Sustainability

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M1 - 11363

ER -

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

Abstract

Keywords

UN SDGs

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