Abstract

The benefits derived from a firm’s sustainable development have been widely promoted. However, the influences have inconsistent conclusions from previous empirical studies, especially from the standpoint of firm value.  This paper attempts to infer the determinants of a firm’s value by exploring whether it predominantly reflects the commonly-used performance criteria in a financial market or a firm’s sustainability nature. The Blinder-Oaxaca decomposition is employed to explain why the market value of sustainable leaders is higher, on average, than that of other firms. Our sample consists of U.S. S and P 500 companies from 1999 - 2002.  The results suggest that not more than 40% of the difference (gap) can be explained by differing determinants of a firm’s operation, financial, growth and industrial variables.  It is therefore suggested that ‘corporate sustainability’ definitely counts as intangible assets that our investors have valued.

Key words:  Corporate sustainability, firm value, blinder-oaxaca decomposition.