Corporate Sustainability: First Evidence on Materiality
2016/01/01 by Mozaffar Khan, George Serafeim, Aaron Yoon · 1,596 citations
Business, Management and Accounting · #Accounting #Auditing, Earnings Management, Governance #Business #Corporate Social Responsibility Reporting #Corporate sustainability #Economics #Enterprise value #Finance #Financial Reporting and Valuation Research #Materiality (auditing) #Portfolio #Return on assets #Stock (firearms) #Stock exchange #Sustainability #Sustainability organizations #Sustainability reporting
paper · doi:10.2308/accr-51383
published in The Accounting Review 91(6), 1697-1724 (American Accounting Association)
openalex publication_date 2016/01/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/08/05
Abstract
ABSTRACT Using newly available materiality classifications of sustainability topics, we develop a novel dataset by hand-mapping sustainability investments classified as material for each industry into firm-specific sustainability ratings. This allows us to present new evidence on the value implications of sustainability investments. Using both calendar-time portfolio stock return regressions and firm-level panel regressions, we find that firms with good ratings on material sustainability issues significantly outperform firms with poor ratings on these issues. In contrast, firms with good ratings on immaterial sustainability issues do not significantly outperform firms with poor ratings on the same issues. These results are confirmed when we analyze future changes in accounting performance. The results have implications for asset managers who have committed to the integration of sustainability factors in their capital allocation decisions.
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