What is the Value of Corporate Social Responsibility? An Answer from the Brazilian Sustainability Index

Abstract

Using a sample of non-financial Brazilian companies from 2005 to 2007, this paper analyzes whether corporate social responsibility has an impact on firm value. Using companies' Tobin's Q as a proxy for their market value, the paper finds that firms that compose the Bovespa Corporate Sustainability Index (ISE) are traded at a premium compared to the other publicly traded firms. The result is robust to the inclusion of a set of control variables and the method of estimation. In addition, after controlling for self-selectivity, the results confirm that policies that focus on corporate sustainability add value to the firm. The paper indicates that the benefits of corporate social responsibility policies surpass the possible costs implied by the adoption of such policies, leading corporate social responsibility to exert a positive impact on firm value.

Keywords: Firm Value, Corporate Social Responsibility, Sustainability, Emerging Markets, Brazil

JEL Classification: G15, G32